Borge v. Commissioner

Borge (plaintiff) ran a money-losing poultry business, which he transferred to a corporation, Danica, while separately earning large income as an entertainer. He assigned Danica the rights to his entertainment services for five years for a $50,000 annual salary, though Danica earned far more from his performances and did nothing to arrange or assist his entertainment career. This let Borge offset the poultry losses against the entertainment profits. Over five years he generated an average of $166,465 for Danica. Under 26 U.S.C. section 482, the Commissioner (defendant) reallocated $100,000 of Danica's income to Borge personally.

Whether income is taxable to the person who earns it, such that the Commissioner may reallocate income assigned to a controlled corporation that did not earn it.