Joyce H. Sams - Page 9




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          deductions should have been reported and claimed on petitioner’s            
          individual return because:  Petitioner sold real estate for and             
          received commissions from O’Brien; all payments were made to                
          petitioner in her name and were either deposited in her                     
          individual bank accounts or endorsed by her; and petitioner did             
          not receive a salary from Sams, Inc. during the year at issue.              
               We consider whether the gross receipts were properly                   
          allocated by respondent and are taxable to petitioner under                 
          either the assignment of income doctrine and section 61 or under            
          section 482, the regulations, and the case law thereunder.5                 
               Gross income includes all income from whatever source                  
          derived.  Sec. 61(a).  Under the assignment of income doctrine              
          and section 61, salaries, fees, and compensation are taxed to               
          those who earned them.  United States v. Basye, 410 U.S. 441, 447           
          (1973); Leavell v. Commissioner, 104 T.C. 140, 149 (1995) (citing           
          Lucas v. Earl, 281 U.S. 111, 114-115 (1930)).  The application of           
          the assignment of income doctrine requires an analysis of who               
          controlled the earning of income and who is the employer.                   

               5  We note that respondent has not alleged that the gross              
          receipts should be allocated under sec. 269A.  The application of           
          sec. 269A to a personal service corporation (PSC) requires a                
          finding that the principal purpose for forming or availing of               
          that PSC is the avoidance or evasion of income tax by reducing              
          income or securing the benefit of an expense, deduction, credit,            
          exclusion, or other allowance for any employee-owner which would            
          not otherwise be available.  Sec. 269A(a).  There are no facts in           
          the record that would lead us to conclude that petitioner’s                 
          principal purpose for incorporating Sams, Inc. was avoidance or             
          evasion of income tax.  Therefore, sec. 269A is inapplicable.               





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