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the long line of authority beginning with Lucas v. Earl, 281 U.S.
111 (1930). Accordingly, respondent asserts petitioner’s gross
income includes the $103,420 paid for petitioner’s services
during 1993, even though petitioner did not directly receive the
payments of that income but instead caused the payments to be
diverted to Universal.
Petitioner claims that Universal (and not petitioner) should
be taxed on the $103,420 in question, because Universal was the
“true earner” of that income. According to petitioner, Universal
provided the services for which it was paid; petitioner was
simply Universal’s agent or employee. Petitioner additionally
asserts that in these circumstances, taxing petitioner on the
income in question would conflict with well-settled law
recognizing personal service corporations as the “true earners”
of the income generated by the efforts of their shareholder/
employees.
We agree with respondent. The record establishes that
petitioner’s transfer to Universal was a classic assignment of
income of the kind described in Lucas v. Earl, supra. Because
such assignments are ineffective for Federal income tax purposes,
petitioner remained the party taxable on the income generated by
his services.
One of the primary principles of the Federal income tax is
that income must be taxed to the one who earns it. The Supreme
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