Robert E. Corrigan - Page 23

                                       - 23 -                                         
          argue, however, that such payments would not be deductible as               
          being illegal.  See sec. 162(c)(2).  Finally, respondent argued             
          that the payments are not deductible as a rebate or price                   
          reduction because JLB Capital paid the commissions for its stock            
          purchases to Smith Barney under their customer-broker business              
          relationship.                                                               
               The question we consider focuses upon whether petitioner is            
          entitled to reduce the gross commission income received from                
          Smith Barney or whether the payments he made to JLB Capital are             
          deductible as employee business itemized deductions from adjusted           
          gross income.  We agree with respondent that in these                       
          circumstances petitioner is not entitled to reduce gross income             
          by the payments made to JLB Capital.  See Alex v. Commissioner,             
          70 T.C. 322 (1978), affd. 628 F.2d 1222 (9th Cir. 1980); see                
          also Pittsburgh Milk Co. v. Commissioner, 26 T.C. 707 (1956) (in            
          which such a reduction of income was permitted in a two-party               
          transaction).  Here, petitioner is an agent or employee of Smith            
          Barney with whom JLB Capital and Bergman have contractual                   
          relationships regarding stock trading and commissions.  The                 
          commissions received by petitioner in his role as a Smith Barney            
          employee and the payments made to JLB Capital are not reductions            
          or rebates of the customer’s commission payments to Smith Barney.           









Page:  Previous  13  14  15  16  17  18  19  20  21  22  23  24  25  26  27  28  29  30  31  32  Next

Last modified: May 25, 2011