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OPINION
I. Advance Commissions
A. Introduction
During 1992 and 1993, petitioner James J. Gales (petitioner)
was engaged as national marketing director by International
Marketing Agencies, Inc. (IMA). IMA sold insurance as the agent
of certain insurance companies. Petitioner both supervised the
sale of insurance by others and sold insurance himself.
Petitioner’s engagement by IMA was governed by an agreement (the
agreement) that provided, among other things, for the payment to
petitioner of commissions in advance of his earning those
commissions under the agreement. IMA reported all payments made
to petitioner during 1992 and 1993 (the 1992 and 1993 payments,
respectively) as miscellaneous income. Petitioners reported
those amounts on their 1992 and 1993 returns but deducted amounts
in excess of amounts stated by IMA to have been earned during
each of those years. We must determine whether the amounts
deducted, “advance commissions” (advance commissions), constitute
gross income. Petitioner argues that advance commissions were
amounts lent by IMA to petitioner.
Petitioners bear the burden of proof, Rule 142(a), which
they must carry by a preponderance of the evidence; e.g., UFE,
Inc. v. Commissioner, 92 T.C. 1314, 1321 (1989).
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Last modified: May 25, 2011