Universal Trust 06-15-90 - Page 4




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                    Johnston, without petitioner’s involvement.4  Accordingly, we                                                                                          
                    held that Mr. Johnston was the person who earned that $103,420                                                                                         
                    and that Mr. Johnston’s attempt to divert his personal service                                                                                         
                    income to petitioner was an ineffective “assignment of income”,                                                                                        
                    under the long line of authority beginning with Lucas v. Earl,                                                                                         
                    281 U.S. 111 (1930).5                                                                                                                                  
                    Background                                                                                                                                             
                              The record consists of a few exhibits and a limited amount                                                                                   
                    of testimony.                                                                                                                                          


                              4 In Johnston v. Commissioner, T.C. Memo. 2000-315, we also                                                                                  
                    found that $1,341 of the $104,786 paid to petitioner was paid for                                                                                      
                    work done by Julia Ghavami (Ms. Ghavami).  On July 27, 2000, the                                                                                       
                    Court entered an agreed decision that Ms. Ghavami has no                                                                                               
                    deficiency for 1993.                                                                                                                                   
                              5 Our opinion in Johnston v. Commissioner, supra, issued on                                                                                  
                    Oct. 6, 2000, concerned Mr. Johnston’s income tax for 1993.  The                                                                                       
                    Court has also redetermined Mr. Johnston’s income taxes for 1990-                                                                                      
                    92 and 1994-95, see Johnston v. Commissioner, docket No. 18619-99                                                                                      
                    (Johnston II), and acted on respondent’s motion to dismiss for                                                                                         
                    lack of jurisdiction with respect to the trust herein for 1994-                                                                                        
                    95, docket No. 18438-99.  On Nov. 17, 2000, the Court entered a                                                                                        
                    decision for the Commissioner in Johnston II, pursuant to a bench                                                                                      
                    opinion rendered on Oct. 19, 2000.  On Nov. 27, 2000, the Court                                                                                        
                    granted respondent’s motion and entered an order dismissing                                                                                            
                    docket No. 18438-99.                                                                                                                                   
                              In Johnston II, the Court found that World Wide Mortgage                                                                                     
                    Corp. and other third parties made payments during 1990-92 and                                                                                         
                    1994-95 for work performed by Mr. Johnston; these payments were                                                                                        
                    deposited in Universal Trust’s bank account.  The Court concluded                                                                                      
                    in Johnston II that this attempted diversion of Mr. Johnston’s                                                                                         
                    service income, like the diversion at issue in our earlier                                                                                             
                    Johnston opinion, was an “assignment of income” that would not be                                                                                      
                    recognized for Federal income tax purposes.                                                                                                            






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