Brief Fact Summary. Petitioner was an entertainer and owned a poultry business. He transferred the poultry business to a corporation he wholly owned. He and the corporation agreed to an arrangement wherein his entertainment income could offset losses of the corporation.
Synopsis of Rule of Law. Gross income may be apportioned among organizations, trades or businesses if necessary to reflect income or prevent tax evasion if they are owned or controlled by the same interests.
Whether the Tax Court was correct in allocating income to the petitioner under § 45, I.R.C. is essentially one of fact and the decision below must be affirmed if supported by substantial evidence.View Full Point of Law
Issue. Did the Commissioner correctly attribute a portion of Danica’s income to Petitioner?
Held. Circuit Judge Hays issued the opinion for the United States Second Court of Appeals in upholding the Commissioner’s ruling that Petitioner controlled Danica.
Discussion. Petitioner wholly owned Danica and the purpose of the arrangement between the two was to allow Danica to offset losses by using Petitioners income. The Court of Appeals found that the Commissioner had substantial evidence to support his ruling that in order to properly account for taxes a portion of that income should have been attributed to Petitioner, since he earned it.