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between petitioner and Penn Life, petitioner earned commissions
in the amount of $225,319.
Petitioner founded American Keystone Group, Inc. (AKG), on
May 23, 1994. During 1994, petitioner transferred AKG to his
brothers, Michael Zaal and Chris Zaal. On or about August 1,
1994, petitioner assigned his rights under the contract with Penn
Life to AKG. In total, during 1994, petitioner assigned $113,081
of Penn Life commissions to AKG.
On his 1994 Federal income tax return, petitioner included
$113,835 of the $225,319 in Penn Life commissions in his gross
income. Petitioner also earned commissions of $1,582 from Time
Insurance Co., and he received $6,878 from the sale of
stocks/bonds and dividend income of $32 both from Smith Barney,
Inc.
OPINION
Renewal Commissions
Petitioner contends that $113,081 in renewal commissions
paid by Penn Life in 1994 is not taxable to him because he sold
them to AKG, which actually received the payments. Respondent
contends that the payment of the commissions to AKG instead of to
petitioner was an anticipatory assignment of income, and
petitioner is liable for taxes on the commissions.
We agree with respondent. The applicable legal principles
are well established, although stated in various ways:
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