Allen v. Commissioner

Richard Allen (plaintiff) was a baseball player. While Richard was in high school, he was scouted by John Ogden, a scout for the Philadelphia National League Club (the Phillies). As head of the family, Richard’s mother, Era, negotiated Richard’s contract with the Phillies. Era also signed Richard’s contract with the Phillies, as all professional baseball teams required consent from any player’s parent or guardian if the player was under the age of 21. Richard was 18 at the time that the contract was signed. The Phillies offered Richard a $70,000 signing bonus, to be paid over five years. Era, Richard, and the Phillies came to an agreement by which Era would be paid $40,000 of Richard’s bonus directly. Era reasoned that she took care of Richard and negotiated his contract and, therefore, should be compensated. The Phillies did not care where the money went and so agreed to direct a portion of the bonus to Era. On his income-tax return, Richard did not include the payments the Phillies made to Era as part of his gross income. The Commissioner of Internal Revenue (the Commissioner) (defendant) determined that Richard was deficient on his income-tax returns because Richard did not include his mother’s portion of the signing bonus in his taxable income. The Commissioner pointed to § 73 of the Internal Revenue Code to argue that all money received in relation to services performed by a minor—in this case, Richard—must be included in his income, even if the money was paid directly to the minor’s parent. Richard petitioned the United States Tax Court for a redetermination.