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substantially larger and, on occasion, reductions in the amount
of commissions were negotiated.
During 1987 and 1988, JLB Capital, which was owned by Jack
Bergman (Bergman), was a Smith Barney customer which was serviced
by petitioner. Petitioner was the account executive for three
JLB Capital accounts. JLB Capital was operated by Bergman as a
proprietorship during the years at issue. In 1987 and 1988, JLB
Capital purchased syndicated stock offerings through petitioner,
who negotiated with Bergman to rebate a portion of the commission
petitioner received from Smith Barney for syndicated stock sales
to JLB Capital. On his 1987 and 1988 tax returns, petitioner
claimed reductions in gross income for “rebates” of $289,926 and
$135,000, respectively.3 The rebates were paid out of the
commissions petitioner earned from Smith Barney. Petitioner
issued Forms 1099 to JLB Capital with respect to the above-
described payments.4
Petitioner managed a Smith Barney brokerage account in his
name and a second account held jointly with Mrs. Corrigan during
3 For 1988, petitioner also claimed a reduction in income of
$23,837 for an amount claimed to be paid to an Anitra Kalagian.
Petitioner concedes that this item is not proper to consider in
computing his tax liability.
4 For 1987 and 1988, petitioner was able to show, by means
of canceled checks, that he had paid rebates of $265,699 and
$115,000, respectively, to JLB Capital or Bergman. The Forms
1099 issued to JLB Capital and the canceled checks are the only
support petitioner provided for the rebates reported on his
returns.
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