Daniel C. McManus - Page 6

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          subvert this principle by deflecting income away from its true              
          earner to another entity through contractual arrangements,                  
          however drafted, are not recognized as dispositive for Federal              
          income tax purposes.  Id. at 114-115; Vercio v. Commissioner, 73            
          T.C. 1246, 1253 (1980).  The Supreme Court has referred to this             
          assignment of income rule as “the first principle of income                 
          taxation”, Commissioner v. Culbertson, 337 U.S. 733, 739 (1949),            
          and “a cornerstone of our graduated income tax system”, United              
          States v. Basye, 410 U.S. 441, 450 (1973).                                  
               Petitioner does not dispute that the amount paid to Salt               
          Creek Services for work performed must be taxed to the earner of            
          the income.  Instead, petitioner asserts that for tax purposes,             
          Salt Creek Services should be considered to have earned the                 
          income (i.e., was the “true earner” of the income) for the years            
          at issue because of the assignment.  However, petitioner, not               
          Salt Creek Services, was entitled to receive the commissions from           
          Bankers United.  The agency agreement was between petitioner and            
          Bankers United.  Moreover, the record does not contain any                  
          evidence showing an agreement existed between petitioner and Salt           
          Creek Services.  Lastly, outside of his assertions, petitioner              
          produced no evidence showing Salt Creek Services actually                   
          existed.                                                                    
               Accordingly, the Court concludes the assignment to Salt                
          Creek Services was ineffectual to shift the tax burden away from            






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