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corporation’s books. Based on a recommendation of the
corporation’s accountant, petitioner was allowed to draw out of
this account on a weekly basis amounts that were to be considered
as a gift by the corporation to petitioner. No formal agreement
was executed to evidence the character of these payments. The
belief was that, since these payments or draws were gifts and
coming directly from funds that had been advanced by Mr.
Marchisset, the payments would not constitute a wage or salary to
petitioner; therefore, the corporation would avoid payroll taxes
on the distributions, and, in addition, petitioners would enjoy
the benefits of tax-free income, since the payments were believed
to be gifts. Respondent’s examination, however, did not result
in that hoped-for conclusion. In the notice of deficiency,
respondent determined that these payments constituted
compensation for services rendered and, therefore, are gross
income under section 61(a). Petitioners differ with that
determination.
Section 61 provides that gross income includes “all income
from whatever source derived,” unless otherwise provided. The
Supreme Court has consistently given this definition of gross
income a liberal construction “in recognition of the intention of
Congress to tax all gains except those specifically exempted.”
Commissioner v. Glenshaw Glass Co., 348 U.S. 426, 430 (1955).
All realized accessions to wealth are presumed taxable income,
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Last modified: May 25, 2011