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properties, land, and brokerage account. Based upon that
understanding and the issuance of Forms 1099-MISC, Miscellaneous
Income, by the bookkeeping service provider, Mr. Shea deducted
the withdrawn funds on Doris Kropp’s tax returns, including her
1994 tax return. Beginning with when Mr. Shea first prepared a
tax return for Doris Kropp through the filing of her 1994 tax
return, Mr. Shea has never been directed to treat the withdrawn
funds differently.
In 1996, Mrs. Harte obtained a power of attorney from Doris
Kropp. By 1997, Mr. Shea referred only to Mrs. Harte and her
husband with regard to Doris Kropp’s financial affairs.
In separate notices of deficiency for 1994, respondent
determined, among other items, that the $81,000 was nonemployee
compensation and included the $81,000 in Paul’s and Lorna’s
income.4
OPINION
I. Taxability of the $81,000 Withdrawal
Gross income encompasses “all income from whatever source
derived, including * * * Compensation for services”. Sec. 61(a).
The value of property acquired by gift, however, is not included
in gross income. See sec. 102(a). In Commissioner v.
4 Respondent included the entire $81,000 in Paul’s income.
Respondent also included one-half of the $81,000 in Lorna’s
income. Pursuant to applicable community property laws, Paul and
Lorna must each report one-half of any amount established by the
Court as nonemployee compensation.
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Last modified: May 25, 2011