Robert G. Ruckman and Julie Ruckman - Page 11

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          taxed to its true earner, Commissioner v. Culbertson, supra at              
          739-740; Lucas v. Earl, 281 U.S. 111, 114-115 (1930), and a                 
          validly organized and operated corporation's existence must be              
          recognized for tax purposes, Moline Properties, Inc. v.                     
          Commissioner, 319 U.S. 436, 438-439 (1943)--a determination of              
          the true earner requires a more refined inquiry than merely                 
          pointing to the actual performer of the services.  Johnson v.               
          Commissioner, 78 T.C. 882, 890-891 (1982), affd. without                    
          published opinion 734 F.2d 20 (9th Cir. 1984).  Instead, we must            
          determine, as between the corporation and its service-performing            
          agent or shareholder, who controls the earning of the income.               
          Id. at 891, and cases cited therein.  A two-part test must be               
          satisfied before the corporation, rather than its service-                  
          performing agent or shareholder, will be considered to control              
          the earning of the income.  First, the service provider must be             
          the employee of the corporation, whom the corporation has the               
          right to direct and control in some meaningful sense.  Second,              
          there must exist between the corporation and the service                    
          recipient a contract or similar indicium recognizing the                    
          corporation's controlling position.   Haag v. Commissioner, 88              
          T.C. 604, 611 (1987), affd. without published opinion 855 F.2d              
          855 (8th Cir. 1988); Johnson v. Commissioner, supra at 891; see             
          also Leavell v. Commissioner, 104 T.C. 140, 151-152 (1995).                 
               On the basis of the evidence in this case, we do not believe           
          that petitioners can meet either component of the test.  First,             




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