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petitioner’s attempt to divert to Universal the income from his
personal services was an invalid assignment of income under the
long line of authority beginning with Lucas v. Earl, 281 U.S. 111
(1930). Second, respondent asserts that Universal should not be
recognized as a separate taxable entity because it is a “sham”
with no economic substance. Third, respondent asserts that even
if Universal is recognized for tax purposes, it is a grantor
trust whose income is taxable to petitioner under sections 671-
679.
Respondent has also moved for a penalty under section 6673,
on the ground that petitioner’s primary position–-that the
payments made to Universal are not petitioner’s income–-is
frivolous. Moreover, respondent has filed a motion (and
expressed reservations in stipulations) asking us to dismiss the
case at hand, treat certain facts as established, or exclude
certain evidence, as a sanction for petitioner’s failure to
respond to discovery requests and to exchange documents as
required by our standing pretrial order.
We reject petitioner’s procedural challenges to respondent’s
actions, deny petitioner’s motions, and hold that petitioner’s
attempted diversion to Universal of the income from his personal
services was an invalid assignment of income. We also hold that
petitioner has failed to show he is entitled to additional
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Last modified: May 25, 2011