- 14 -14
In sum, AJF's tax reporting and other actions have not shown
an honest and consistent respect for what petitioners argue is
the substance of these reimbursements. Therefore, respondent has
shown by clear and convincing evidence that the fuel
reimbursement checks should be included in AJF's gross income.
2. Inclusion of AJF's Custom Decorating Checks and
Fuel Reimbursement in Ferrentino's Gross Income
The next question is whether Ferrentino, as president and
sole shareholder of AJF, must include the Custom Decorating and
fuel reimbursement checks in gross income because he cashed the
checks personally. Generally, "income that is subject to a man's
unfettered command and that he is free to enjoy at his own option
may be taxed to him as his income, whether he sees fit to enjoy
it or not." Corliss v. Bowers, 281 U.S. 376, 378 (1930).
Respondent argues that Ferrentino should include the
diversions as ordinary income. Ferrentino, on the other hand,
argues that the cashed checks do not represent income to him
because he received the checks on behalf of AJF as its "agent"
and that the cash was held in "constructive trust" to pay a
business expense of AJF.
Generally, "a taxpayer need not treat as income moneys which
he did not receive under a claim of right, which were not his to
keep, and which he was required to transmit to someone else as a
mere conduit." Diamond v. Commissioner, 56 T.C. 530, 541 (1971),
affd. 492 F.2d 286 (7th Cir. 1974). No tax is imposed upon the
receipt of money in a fiduciary or agency capacity. Stone v.
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