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Borge v. Commissioner

United States Court of Appeals for the Second Circuit
405 F.2d 673 (1968)


Borge (plaintiff) produced and sold poultry. He sustained considerable losses each year. In 1958, Borge formed Danica Enterprises, Inc. (Danica) and transferred the poultry business to the corporation. At the time, Borge earned substantial income as an entertainer. He assigned to Danica the rights to his services as an entertainer for five years in exchange for an annual salary of $50,000. Danica received entertainment profits far greater than the $50,000 it paid to Borge. Because of this, Danica was able to offset its losses from the poultry business against the entertainment profits it received through Borge. During this period, Danica’s sole source of income was from Borge’s entertainment profits. But Danica did not arrange any entertainment contracts for Borge or provide any other assistance to Borge in his entertainment business. During the five-year period from 1958–1962, Borge generated an average of $166,465 in income for Danica. Under 26 U.S.C. § 482, the Commissioner (defendant) designated $75,000 of Danica’s annual income from 1958–1961, and $25,000 of Danica’s income for 1962, as personal income to Borge.

Rule of Law


Holding and Reasoning (Hays, J.)

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