- 14 -
section 401(c) as supporting dual classification is erroneous.
Finally, respondent argues that the separation from service cases
are irrelevant to the case at hand.
3. Analysis
Allstate included Mrs. Lozon in their pension plan and the
profit sharing fund because they considered her to be an
employee.7 We held, supra, that petitioners' relationship to
Allstate was that of an independent contractor and not that of an
employee. Petitioners argue that Mrs. Lozon can, nevertheless,
avoid current taxation on amounts vested in the pension plan
because respondent agrees that the pension plan was qualified
under section 401 and the trust was exempt under section 501(a).
Respondent wants to remove the "bad apples" from Allstate's
pension plan "barrel" without advocating that the plans
themselves be disqualified. As respondent states on brief, "The
qualified plans at issue defer the current receipt of income of
employee Agents of Allstate, but cannot defer income of non-
employee independent contractors." Respondent, however, does not
suggest a statutory framework to remove the bad apples (the
people who have been mistakenly included in the pension plan).
Respondent determined that the contributions made on behalf
of Mrs. Lozon should be income to her when vested. Petitioners
7 The contributions made to the pension plan on behalf of
Mr. Lozon are not at issue because he was not vested during the
years in issue. Mr. Lozon did not participate in the profit
sharing fund.
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