Johnson v. Commissioner

CitationJohnson v. Commissioner, 78 T.C. 882, 1982 U.S. Tax Ct. LEXIS 91, 78 T.C. No. 62 (T.C. June 7, 1982)

Brief Fact Summary. Petitioner was a professional basketball player. He had a contractual relationship to pay his salary to another corporation, who in turn paid him.

Synopsis of Rule of Law. Income must be taxed to the one who earns it.

Facts. Taxpayer Petitioner is a professional basketball player and executed a contract with PMSA for his professional sports services. PMSA licensed its rights to EST who made the required monthly salary payments. EST remitted 95% of its revenue to PMSA. Petitioner signed a professional basketball contract with the Warriors and assigned all his rights to EST and the Warrior paid EST.

Issue. Are the amounts paid by the Warriors Petitioner’s income?

Held. The Tax Court found that Petitioner controlled the earnings and was hi income.

Points of Law - for Law School Success

That seems to us the import of the statute before us and we think that no distinction can be taken according to the motives leading to the arrangement by which the fruits are attributed to a different tree from that on which they grew.

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Discussion. The Tax Court notes that the assignment by Petitioner illustrates his control over the earnings. It is not relevant that Petitioner is contractually obligated to pay his earnings to PMSA and EST. There was no contract between PMSA or EST with the Warriors.

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