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improved real estate. In fact, EIC typically paid commissions
that were between 10-15 percent of the sales price. During 1989,
on average, EIC paid commissions of 13 percent.
Often, more than one agent would be involved with a particu-
lar sale. In these cases, petitioner allocated the 13-percent
commission among the sales agents who participated in the sale,
based upon each agent's level of participation. Petitioner is an
experienced sales agent, however, and many times he would be the
only person involved in a sale by EIC. In those circumstances,
EIC paid the full 13-percent commission to petitioner alone. For
1989, petitioner received $901,428 in commissions from EIC, and
EIC claimed a deduction for this amount.
During the years in issue, the financial relationship
between petitioner and EIC was not limited to the compensation
paid to petitioner. In fact, EIC's financial statements as of
December 31, 1989, disclose both "notes receivable" from peti-
tioner in the amount of $873,194 as well as "notes payable" to
petitioner in the amount of $1,010,895. These amounts comport to
the figures reported in EIC's December 31, 1989, corporate income
tax return. EIC maintained separate accounts in its general
ledger to track funds transferred to petitioner and funds
received from petitioner. As of December 31, 1990, the corporate
income tax return for EIC reported "Loans from Stockholders" of
$1,312,199 and "Loans to Stockholders" of $1,717,892. The
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