-327-
today as a cornerstone of our graduated income tax system.” A
more recent expression by the Supreme Court of the same principle
appears in Commissioner v. Banks, 543 U.S. 426 (2005).
B. The Parties’ Arguments
Petitioners contend the payments THC received from Hi-
Chicago Trust are not taxable to Kanter under the assignment of
income doctrine. Petitioners argue Kanter held a property
interest with respect to the trust and he transferred that
property interest to THC well before the years at issue.
Petitioners also deny the payments THC received from the trust
were compensation for Kanter’s personal services.
Respondent, on the other hand, contends that under the
assignment of income doctrine, the payments were taxable
compensation for Kanter’s personal services.
C. Analysis
Whether the payments to THC are income to Kanter turns on
whether the payments were compensation for Kanter’s personal
services. Kanter testified that, pursuant to the 1972
arrangement among himself, Federman, and the trust beneficiaries,
Kanter was granted a “carried interest” as to Hi-Chicago Trust’s
investment gains and investment properties. Kanter claimed this
“carried interest” arrangement was totally independent of his
serving as Hi-Chicago’s trustee and the payments to THC were not
compensatory. Kanter added that, at some point during the 1970s,
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