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apart throughout 1997. The exact amount of the Social Security
benefits which petitioner must include in income will be
calculated in the Rule 155 computation required in this case.
Separately, petitioner argues that only the portion of the
benefits which he received should be included in income, not the
portions paid for Medicare and paid to his lawyer. As a general
rule, income is taxed to the person earning it even if the right
to receive the income is contractually assigned to another person
prior to its being earned. Lucas v. Earl, 281 U.S. 111 (1930);
Kenseth v. Commissioner, 114 T.C. 399 (2000), affd. 259 F.3d 881
(7th Cir. 2001); Banks v. Commissioner, T.C. Memo. 2001-48; see
also S. Rept. 98-23, 26 (1983), 1983-2 C.B. 328 (stating that the
total amount of Social Security benefits received by a taxpayer
is not to be reduced by attorney’s fees or amounts withheld as
medical insurance premiums). Under this principle, the Social
Security benefits are includable in petitioner’s income despite
the fact that these amounts were paid on his behalf rather than
to petitioner directly.
Under section 212(1), taxpayers are “allowed as a deduction
all the ordinary and necessary expenses paid or incurred during
the taxable year * * * for the production or collection of
income”. The amount of the deduction is limited to expenses
related to the collection of income which is required to be
included in gross income for Federal income tax purposes. Sec.
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