CM HOSKINS V. CIR (TAX)

Issue: Whether the term "gross compensation" in Section 195 includes supervision and collection fees received by a real estate broker as a realty subdivision operator.

With respect to the collection fees, there can be little doubt that the services rendered by Hoskins in collecting the amount due on the sales on the installment plan are incidental to it brokerage service in selling the lots. The sale of a lot may be on the cash basis or on installment. If the broker's commissions on the cash sales, of lots are subject to the brokerage percentage tax, it should logically follow that its commission s on installment sales are likewise taxable.

As to the supervision fees for the development and management of the subdivisions, which fees were paid out of the proceeds of the sales of the subdivision lots, the theory of the Tax Court is that the development, management, and supervision services were necessary to bring about the sales of the lots and were inseparably linked thereto.

The Tax Court did not err in applying to this case the ruling in the Tuason case where it was rules that "the duty of developing the subdivision, with its lots, streets, playgrounds, sewage, etc, is also a necessary incident to the duty of selling the lands subject of the contract." Hence, there is basis for holding that the operation of subdivisions is really incidental to the main business of the broker which is the sale of the lots on commission.