- 14 - repayment was secured by future earned commissions; we found that the advance commissions were loans, whose receipt was not an item of gross income. The agreement provides that it is to be construed pursuant to the laws of the State of Texas and that repayment of advance commissions is to be on demand. Petitioner’s obligation to repay the advance commissions is secured by earned commissions, but respondent has provided no authority that, under Texas law, IMA’s recourse upon a default by petitioner was limited to earned commissions. Indeed, respondent appears to concede petitioner’s personal liability to repay the advance commissions: “Respondent submits that, in the instant case, there was never any current personal liability of petitioner. The personal liability was merely contingent and arose only in the event the earned commissions did not cover the advanced commissions and this was unlikely to occur.” (Emphasis added.) Respondent’s argument is not based on the absence of personal liability as a matter of law, but on the likelihood that petitioner’s earned commissions would always be adequate to cover his advance commissions and payment would never be demanded of him. In fact, petitioner testified that, on occasion, repayment was demanded of him and he repaid some of the advance commissions. We believe petitioner, and we have found accordingly. In the May 1 letter (terminating petitioner’s engagement by IMA), reference is made to reducing petitioner’s debit balance to IMA by his earnings for the vesting term of the agreement “if applicable”. The vesting provisions inPage: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 Next
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