- 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
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