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Petitioner does not deny that he received the payments from
Mr. Muhammad in the amounts determined by respondent. In any
event, substantial evidence was presented which leads us to the
conclusion that petitioner received the amounts calculated by
respondent. Petitioner asserts that such payments were not
income to him but advances made by Mr. Muhammad to pay
subcontractors and purchase materials for the renovation of Mr.
Muhammad’s rental property. Petitioner also asserts that he
received the payments as agent for Mr. Muhammad.
Petitioner contends that he functioned merely as a conduit
through which Mr. Muhammad purchased labor and materials for the
renovation project, with the result that the payments received
from Mr. Muhammad are not taxable to him. Petitioner does not
clearly explain the legal basis for this position, and he cites
no cases in support thereof.
We would agree that a taxpayer need not treat as income
moneys which he did not receive under a claim of right, which
were not his to keep, and which he was required to transmit to
someone else as a mere conduit. See Diamond v. Commissioner, 56
T.C. 530, 541 (1971), affd. 492 F.2d 286 (7th Cir. 1974); see
also Mill v. Commissioner, 5 T.C. 691, 694 (1945); Parker v.
Commissioner, T.C. Memo. 1985-263. On the other hand, if a
taxpayer receives moneys under a claim of right and without
restriction or limitation as to the disposition of the moneys,
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