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to JLB Capital of $289,926 and $135,000, respectively.9
Petitioner contends that he rebated the amounts to JLB Capital to
induce the purchases of certain syndicated stock offerings during
1987 and 1988.
It was not unusual for brokerage firms that offered
syndicated stock to accept reduced commissions. That is on the
basis of the fact that commissions for syndicated stock
transactions were generally larger than those for other stock
transactions. Petitioner reported the gross commission income
received from Smith Barney for his sales of syndicated stock to
JLB Capital. He reduced the amount reported as income by the
rebates or payments made to JLB Capital as an inducement to trade
with him.
Respondent contends that such payments are not deductible
from petitioner’s gross income and, if allowable would, at very
most, be unreimbursed employee expenses that may or may not be
deductible as itemized deductions. Respondent also contends that
these payments may be in violation of California securities law
and that rebates of commissions may result in disciplinary action
or suspension by the New York Stock Exchange. Respondent did not
9 Even though petitioner could not substantiate the entire
amount reported on his tax returns, petitioner was able to
substantiate 85 percent of the claimed amounts by means of
canceled checks. Petitioner’s proffered evidence is sufficient
to show that the amounts claimed were paid. See Cohan v.
Commissioner, 39 F.2d 540 (2d Cir. 1930).
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