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After concessions by petitioner, the issues for decision are
(1) whether petitioner is liable for taxes on $113,081 in
insurance renewal commissions that petitioner assigned to
American Keystone Group, Inc., and (2) whether petitioner is
liable for the substantial understatement penalty under section
6662(a) for 1994.
FINDINGS OF FACT
Some of the facts have been stipulated, and the stipulated
facts are incorporated in our findings by this reference.
Petitioner resided in Plano, Texas, at the time this petition was
filed.
Petitioner was an independent contractor at Pennsylvania
Life Insurance Co. (Penn Life) from June 1974 through January
1994. Petitioner earned commissions on the insurance policies he
sold on behalf of Penn Life. Petitioner and Penn Life
contractually agreed that petitioner would receive commissions on
certain policies petitioner personally sold while an independent
contractor at Penn Life, when and if those policies renewed.
Petitioner and Penn Life also contractually agreed that,
after petitioner's employment with Penn Life was terminated,
petitioner would continue to participate in the profits of Penn
Life pursuant to a schedule to which petitioner and Penn Life
agreed. During 1994, pursuant to the contractual agreements
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