Johnson v. Commissioner

Professional basketball player Charles Johnson (plaintiff) signed a services contract with Panamanian corporation PMSA, which licensed its rights to his services to EST International Ltd. (EST); EST paid Johnson a salary while remitting most revenue (after a 5 percent cut) to PMSA. When the San Francisco Warriors refused to contract with PMSA and insisted on signing Johnson directly, Johnson personally signed a Uniform Player Contract with the Warriors, then assigned his rights under that contract to EST, with the Warriors paying EST directly. Johnson reported only his EST payments as income on his tax returns, but the Commissioner (defendant) determined the full amount the Warriors paid for Johnson's services (not just what EST paid him) was taxable to Johnson personally, issuing deficiency notices that Johnson challenged.