Everett J. Diers - Page 7

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          to make repayment.  Dennis v. Commissioner, T.C. Memo. 1997-275.            
          In many instances, repayment is simply made out of future earned            
          commissions.  Where the repayments will be taken only from future           
          commissions earned, and the agent will not become personally                
          liable in the event that the future income does not cover the               
          repayment schedule, the payments will constitute income to the              
          agent for each year to the extent he received them.  Moorman v.             
          Commissioner, 26 T.C. 666, 673-674 (1956).  These payments are              
          nothing more than disguised salary.  Beaver v. Commissioner, 55             
          T.C. 85, 90 (1970).  However, in the situation where the advances           
          are actually loans, when the repayments are offset directly by              
          the future earned commissions, then the agent will have either              
          commission income or cancellation of indebtedness income at the             
          time of the offsets.  Cox v. Commissioner, T.C. Memo. 1996-241;             
          cf. Warden v. Commissioner, T.C. Memo. 1988-165.                            
               Although petitioner’s employment with American terminated in           
          1994, he continued to earn renewal commissions on policies he had           
          sold before his departure.  As provided in the settlement                   
          agreement, instead of paying these commissions to petitioner,               
          American credited his account showing outstanding advances in               
          accordance with his settlement agreement with American.  When               
          American made the advances to petitioner, he was not taxable on             
          them because they were in effect loans.  See Beaver v.                      
          Commissioner, supra at 91.  When the commissions he earned after            

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