- 7 -
trust documents, respondent determined that the trusts were sham
trusts and that all gross receipts, expenses, and net profits
relating to the chiropractic practice were to be charged to Alsop
individually.
On April 29, 1998, by a supplemental stipulation of facts,
for 1991, 1992, 1993, and 1994, Alsop and respondent agreed to
the total gross receipts, costs of goods sold, expenses, and net
profits relating to the chiropractic practice as follows:
Gross Cost of Net
Year Receipts Goods Sold Expenses Profits
1991 $188,020 $34,942 $103,831 $49,247
1992 178,098 22,265 90,820 65,013
1993 150,535 26,277 87,299 36,959
1994 158,575 30,428 67,867 60,280
OPINION
As a fundamental principle of Federal income tax law, income
is taxed to the person who earns the income. See United States
v. Basye, 410 U.S. 441, 450 (1973); Commissioner v. Culbertson,
337 U.S. 733, 739-740 (1949); Lucas v. Earl, 281 U.S. 111, 114-
115 (1930); Holman v. United States, 728 F.2d 462, 464 (10th Cir.
1984); Leavell v. Commissioner, 104 T.C. 140, 148 (1995).
The tax laws do not recognize sham transactions or
transactions that contradict economic reality. See Higgins v.
Smith, 308 U.S. 473, 477 (1940); Uri v. Commissioner, 949 F.2d
371, 374 (10th Cir. 1991), affg. T.C. Memo. 1989-58. Where the
Page: Previous 1 2 3 4 5 6 7 8 9 10 Next
Last modified: May 25, 2011