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received from third parties reflecting their payments to petitioner
in 1996.
OPINION
Petitioner does not contest respondent’s determinations as set
forth in the notice of deficiency, including the additions to tax,
except for $40,500 of the $60,500 reflected in a Form 1099 issued
to petitioner by the M. Riccardi Agency and used by respondent in
his determination of petitioner’s income. Respondent contends that
petitioner had $40,500 of income in 1996 either from the discharge
of indebtedness she owed Mr. Riccardi or by the constructive
receipt of the commission on the sale of the shopping center. We
agree with respondent.
Section 61(a) defines “gross income” broadly, and specifically
includes both “compensation for services” and “income from
discharge of indebtedness” within its meaning. It is well settled
that where an employee owes a debt to the employer, crediting the
salary earned by the employee against the employee’s debt to the
employer, without any cash changing hands, is income to the
employee. See, e.g., Newmark v. Commissioner, 311 F.2d 913, 915
(2d Cir. 1962) (citing Old Colony Trust Co. v. Commissioner, 279
U.S. 716, 729 (1929)), affg. T.C. Memo. 1961-285; Tucker v.
Commissioner, 69 T.C. 675 (1978); Cox v. Commissioner, T.C. Memo.
1996-241; Phillips v. Commissioner, T.C. Memo. 1993-514; Kelley v.
Commissioner, T.C. Memo. 1991-324, affd. without published opinion
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