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2. Whether Petitioners Improperly Assigned Income From
Accounting and Real Estate Services to Their
Corporations
Petitioners contend that they did not improperly assign Mr.
Arnold’s accounting income to Pacific and Mrs. Arnold’s real
estate commissions to EAPC. Petitioners contend that their
corporations earned that income. Petitioners contend that the
income at issue is not taxable to them under the assignment of
income doctrine because the income was earned by their validly
organized and operated corporations. We disagree.
The existence of a validly organized and operated
corporation does not preclude taxation of income to the service
provider instead of the corporation. Wilson v. United States,
530 F.2d 772, 777-778 (8th Cir. 1976), Haag v. Commissioner, 88
T.C. 604, 610-611 (1987), affd. without published opinion 855
F.2d 855 (8th Cir. 1988); see also Commissioner v. Culbertson,
337 U.S. 733, 739-740 (1949). Deciding whether the corporation
or the service provider earned the income requires that we decide
whether the corporation or its service-performing agent or
shareholder controls the earning of the income. Johnson v.
Commissioner, 78 T.C. 882, 891 (1982) (and cases cited therein),
affd. without published opinion 734 F.2d 20 (9th Cir. 1984).
A corporation earns the income if: (a) The service provider
is an employee of a corporation which has the right to direct or
control that employee in some meaningful sense; and (b) there
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