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a beneficiary with a foreign address, which Mr. Chisum asserted
was a Turks and Caicos trust with a foreign trustee.
Fourth, we have held that two elements must be present
before a PSC, rather than its service-performing employee, can be
considered the true earner of the income. First, the service-
performing employee must be just that–-an employee of the PSC,
whom the PSC has the right to direct or control in some
meaningful sense. Second, the PSC and the person or entity using
the employee’s services must have a contract or similar
arrangement recognizing the PSC’s controlling position. See
Johnson v. Commissioner, 78 T.C. at 891. Neither of these
elements is present in the case at hand.
In short, the authorities concerning the taxation of PSC’s
confirm rather than challenge our conclusion that petitioner’s
attempted diversion to Universal of the compensation for his
services was an invalid assignment of income.
We hold that petitioner’s gross income includes the $103,420
paid to Universal, as determined by respondent. Because we reach
this holding under the assignment of income rule, we need not
consider respondent’s alternative arguments that Universal was a
sham or a grantor trust.12
12 Petitioner also argues that our holding conflicts with
certain Courts of Appeals decisions concerning the tax treatment
of contingent legal fees. See, e.g., Estate of Clarks v. United
(continued...)
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