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long time ago. Maney believed that his 40-year-old felony
conviction would make fulfillment of his dream of owning a bar
impossible if he filed for the licenses himself. So Monk filed
the paperwork for him, not realizing how much it might matter
whose name was on the liquor and lottery licenses or on the bank
account. (Though we assert no expertise in Maryland
administrative law, it seems unlikely that either Monk or Maney
will benefit from the position on the true ownership of Chuck’s
Place that they have taken in this case when Maryland authorities
learn of it, further bolstering their credibility on this point.)
In situations like this, where there is written
documentation which contradicts the reality of a situation, we
disregard the documents to properly tax the person actually
earning the income. We did just this in the very similar case of
Malone v. Commissioner, T.C. Memo. 2005-69, where we held that a
family music business should be taxed to the children who
actually ran the business and not to the parents whose names were
on the legal paperwork. “[A]lthough not determinative in a
general sense, in a labor-intensive business with no employees,
there is a strong suggestion that the individuals performing the
labor own the business.” Id. Likewise, we find in this case
that the profits and losses from Chuck’s Place are not assignable
to Monk, who had no real involvement in the business, despite the
fact that he put his name on the paperwork.
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Last modified: March 27, 2008