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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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Last modified: May 25, 2011