Robert Henry Lehmuth - Page 11

                                       - 10 -                                         
         unauthorized use of funds from which the principal derives no                
         benefit.  Alsop v. Commissioner, 290 F.2d 726, 728 (2d Cir.                  
         1961), affg. 34 T.C. 606 (1960); Grant v. Commissioner, T.C.                 
         Memo. 1995-29, affd. on another issue 103 F.3d 948 (11th Cir.                
         1996).  However, if the principal derives an economic benefit                
         from the agent’s actions, the principal constructively receives              
         the income even though the agent took unauthorized action to the             
         detriment of the principal.  Sowell v. Commissioner, 302 F.2d                
         177, 179-180 (5th Cir. 1962), revg. T.C. Memo. 1961-115; Wells v.            
         Commissioner, T.C. Memo. 1967-154.                                           
              Mr. Davis, as petitioner’s attorney, was acting as                      
         petitioner’s agent when he properly received the settlement                  
         proceeds from Kits.  See Estate of Kamm v. Commissioner, 349 F.2d            
         953, 956 (3d Cir. 1965), affg. T.C. Memo. 1963-344.  Therefore,              
         in the absence of an exception to the general rule, the money                
         received by Mr. Davis was constructively received by petitioner.             
              Petitioner asserts that he did not authorize Mr. Davis to               
         retain any portion of the $15,000 to which petitioner was                    
         entitled pursuant to the settlement agreement.  He also states               
         that he never expressed to Mr. Davis an interest in either                   
         participating or investing in the store manager case.  After                 
         receiving the $12,500 check, petitioner asked Mr. Davis on                   
         several occasions to send him the remaining $2,500, but he never             
         received these funds.  Mr. Davis responded to petitioner’s                   

Page:  Previous  1  2  3  4  5  6  7  8  9  10  11  12  13  14  Next

Last modified: May 25, 2011