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II. Respondent’s Motion for Reconsideration
Having disposed of petitioners’ motions, we next turn our
attention to respondent’s motion for reconsideration. In our
memorandum opinion, we considered the characterization, and
corresponding tax treatment, of two types of payments received by
petitioners from FIL: (1) Payments made directly to certain of
petitioners (termed “special commissions”), and (2) payments made
to a partnership and reported by certain of petitioners as their
distributive shares of partnership income. We refused to accept
petitioners’ argument that these amounts were in substance
dividends and should be treated as such for tax purposes. In so
doing, we highlighted a number of representations contained in
the record which convinced us that both types of payments must be
treated as compensation. Included amongst those representations
was petitioners’ designation of the payments on their Forms 1116
as “General limitation income”. We further cited the general
rule that compensation would be identified for purposes of this
form as “General limitation income” while dividends would
typically be placed in the “Passive income” category.
Against this background, respondent states on motion that
petitioners’ Form 1116 reporting is consistent with our holding
that the payments are properly characterized as consulting or
compensation income. However, respondent asks us to clarify that
petitioners’ classifying of the payments from FIL as general
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