John D. and Karen Beatty - Page 1

          106 T.C. No. 14                                                             

                               UNITED STATES TAX COURT                                

                      JOHN D. AND KAREN BEATTY, Petitioners v.                        
                    COMMISSIONER OF INTERNAL REVENUE, Respondent.                     

               Docket No. 8273-94.              Filed April 17, 1996.                 

                    P, an Indiana county sheriff, was required by State               
               statute to provide meals to the prisoners incarcerated in              
               the county jail.  The costs of providing the meals were                
               borne by P.  P received a meal allowance from the county on            
               a per meal basis at a specified rate established by the                
               State.  P claims that he provided the meals to the county              
               prisoners as an independent contractor, and reported the               
               meal allowances received and costs incurred on a Schedule C.           
               R contends that P provided the meals to the county prisoners           
               as an employee of the county and must deduct such costs on a           
               Schedule A as employee business expenses.  Held:  The costs            
               of the meals constitute costs of goods sold and are taken              
               into account in the determination of P's gross income.                 
               Consequently, under the circumstances of this case, it makes           
               no difference for Federal income tax purposes, whether P               
               provided the meals to the prisoners as an independent                  
               contractor or county employee.                                         

               Stephen E. Arthur and Ronald M. Soskin, for petitioners.               
               Ronald T. Jordan, for respondent.                                      

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