Robert L. Boehm and Winona J. Mowrey - Page 8




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          entirety, “Winona J. Mowrey, FOR SERVICES RENDERED FOR YEAR ENDED           
          1993    $102,955.33”.  The document bears no letterhead and                 
          contains no reference to Crestmark.  This purported invoice sheds           
          little light on what services the $102,955 deposit compensated.             
               The record is devoid of any evidence to suggest that the               
          fees purportedly paid to Crestmark were the result of arm’s-                
          length bargaining.  There was no contract between the individual            
          petitioners or between Mowrey and Crestmark spelling out the                
          nature and terms of services to be provided by Boehm.  The                  
          individual petitioners’ testimony on the method of compensation             
          was vague and inconsistent.  Mowrey testified that fees paid to             
          Crestmark were based on a percentage of “less than 10 percent of            
          total income”, and that the amount varied “on budget preparation            
          time and that type of thing”.  Boehm testified:  “I charge                  
          whatever I want to.”                                                        
               Even assuming, arguendo, that the claimed deduction                    
          represented a reasonable allowance for services performed by                
          Boehm, petitioners have not established that Boehm performed                
          these services in his capacity as an employee of Crestmark,                 
          rather than in his own capacity.  This consideration implicates             
          the “first principle of income taxation:  that income must be               
          taxed to him who earns it.”  Commissioner v. Culbertson, 337 U.S.           
          733, 739-740 (1949) (citing Lucas v. Earl, 281 U.S. 111 (1930)).            
               Generally, a corporation constitutes a separate taxable                
          entity and will not be ignored for Federal income tax purposes if           



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