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During the years in issue, petitioner, WFIC, or Epic Real
Estate brokered numerous real estate transactions. In some of
these transactions, a commission was transferred from WFIC’s
trust account to its checking account. In 1990, commissions of
$38,446 from two transactions were transferred from WFIC’s trust
account to WFIC’s checking account. Additional commissions of
$17,700 were paid by check to either petitioner or WFIC. In
1991, commissions of $18,552 from two transactions were
transferred from WFIC’s trust account to WFIC’s checking account.
In 1992, a brokerage fee of $1,566 was paid by check made out to
petitioner. In 1993, a brokerage fee of $28,000 was transferred
from WFIC’s trust account to its checking account, and a
commission of $102,080.25 was paid by check to Epic Real Estate.
WFIC filed Forms 1120, U.S. Corporation Income Tax Return,
for its taxable years ending December 31, 1990, 1991, 1992, and
1993. Petitioner prepared those returns. WFIC reported the
commissions from petitioner’s real estate activities in 1990,
1991, 1992, and 1993 as income on its corporate tax returns for
those years. Respondent does not dispute that WFIC reported all
of the real estate commissions on its corporate returns for the
years in issue. The commission income was offset by net
operating losses that WFIC held at the time petitioner began
running WFIC. WFIC did not pay petitioner the real estate
commissions; petitioner’s only salary was from Taxman.
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