C. Earl Alsop - Page 7




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          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             






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