Anastasato v. Commissioner

794 F.2d 884 (1986)

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Anastasato v. Commissioner

United States Court of Appeals for the Third Circuit
794 F.2d 884 (1986)

Facts

Pano Anastasato (plaintiff) owned Panmarc, Inc., a travel agency that purchased plane tickets for customers directly from airlines. Panmarc was part of a trade association that required its members to limit the commission it received from airlines on a ticket sale to 10 percent of the ticket’s price. The association imposed strict sanctions for violations. Nevertheless, member travel agencies routinely sought commissions in excess of the 10 percent cap, called override commissions. To avoid detection by the trade association, travel agencies negotiated override commissions in secret and obscured the channels through which they were paid. KLM Royal Dutch Airlines (KLM) was one of Panmarc’s major vendors. Anastasato tasked one of his employees, Andre Luber, with negotiating override rates with KLM. Luber claimed to have negotiated override rates with KLM as high as 21 percent. Moreover, an Internal Revenue Service (IRS) (defendant) agent investigating Anastasato met with KLM employees and claimed that the employees showed him receipts for payments of override commissions to a Swiss bank account owned by Anastasato. Anastasato never claimed any income from override commissions on his tax returns. The IRS issued Anastasato a notice of deficiency, determining that Anastasato had received but failed to report the override commissions. Anastasato filed a petition in the United States Tax Court challenging the deficiency. At trial, Anastasato claimed that he never received the override commissions. The tax court determined that Anastasato’s denials were irrelevant because the IRS was entitled to a presumption that its determination of his tax liability was correct. Anastasato appealed.

Rule of Law

Issue

Holding and Reasoning (Hunter, J.)

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