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section 7491(a) applies. Accordingly, the burden remains on
petitioner.
Petitioner contends that he should not be held liable for a
tax on the additional $12,258 of gambling income for the 2003
taxable year because he was a mere “conduit” (i.e., a “runner” or
“ten percenter”) and that Mr. Umali was the actual recipient of
the gambling income.
In general, section 61(a) defines the term “gross income” to
include “all income from whatever source derived” unless it is
specifically excepted.
Under the claim of right doctrine, if a taxpayer receives
money under a claim of right and without restriction as to its
disposition, then he has received income that he is required to
report even though it may still be claimed that he is not
entitled to retain the money and may be ordered to restore its
equivalent. N. Am. Oil Consol. v. Burnet, 286 U.S. 417 (1932).
But under the conduit theory, if a person receives funds merely
to enable him to act as a conduit of the funds to another, then
he does not have a claim of right to the funds, and the funds
received are not income to him to the extent that he passes them
on to the person for whom the funds were intended. Goodwin v.
Commissioner, 73 T.C. 215, 232 (1979).
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