Mario O. and Elsie R. Garza - Page 9

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          commissions on policies he had sold before his departure.                   
          Instead of paying these commissions to petitioner, American Life            
          diverted the commissions to his accounts showing balances owed by           
          petitioner for the advances and expense payments previously                 
          described.  When American Life previously made advances to                  
          petitioner, he was not taxable on such advances because the                 
          advances were loans secured and payable through future earned               
          commissions.  Beaver v. Commissioner, 55 T.C. 85, 91 (1970);                
          Diers v. Commissioner, supra.  When American Life applied the               
          renewal commissions to petitioner’s outstanding account balances,           
          petitioner’s obligation to repay the loans was reduced by those             
          amounts, and the reduction of his obligations constituted his               
          receipt of taxable income.  Diers v. Commissioner, supra; Newmark           
          v. Commissioner, 311 F.2d 913, 915 (2d Cir. 1962), affg. T.C.               
          Memo. 1961-285.  Therefore, the Court holds that petitioner                 
          received commission income during 1999, 2000, and 2001, in the              
          amounts of $20,957, $17,705, and $14,673, respectively, as                  
          determined in the notice of deficiency.  Respondent, therefore,             
          is sustained on this issue.                                                 
               The second issue is whether petitioners are liable for                 
          self-employment taxes for 1999, 2000, and 2001 under section 1401           
          based on the aforesaid income.                                              
               Section 1401(a) imposes a tax upon the self-employment                 
          income of every individual.  In general, self-employment income             






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