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Respondent contends that Hathaway was a common law employee
in 1989 and 1990, and thus was required to report his income as
wages and to deduct allowable expenses as itemized deductions
subject to the limitations of section 67.
We agree with petitioners that Hathaway was an independent
contractor.
Although paragraphs (1) and (2) of section 62(a) make the
income tax treatment of a taxpayer’s trade or business expense
deductions depend on whether the taxpayer is “perform[ing] * * *
services * * * as an employee”, subtitle A does not define
“employee”. Under these circumstances, we apply common law rules
to determine whether an individual is an employee. Nationwide
Mut. Ins. Co. v. Darden, 503 U.S. 318, 323-325 (1992); Weber v.
Commissioner, 103 T.C. 378, 386 (1994), affd. 60 F.3d 1104 (4th
Cir. 1995). In making this determination, we look to the general
common law of agency and not the law of any particular State.
Nationwide Mut. Ins. Co. v. Darden, 503 U.S. at 323 n.3 (citing
with approval Community for Creative Non-Violence v. Reid, 490
U.S. 730, 740 (1989)).
Whether a taxpayer is an independent contractor or a common
law employee is a question of fact, Wolfe v. United States, 570
F.2d 278, 281-282 (8th Cir. 1978); Weber v. Commissioner, 103
T.C. at 386, or a mixed question of fact and law. Professional &
Executive Leasing, Inc. v. Commissioner, 862 F.2d 751, 753 (9th
Cir. 1988), affg. 89 T.C. 225 (1987).
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