Lance R. and Elaine C. LeFleur - Page 25

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            (above-the-line deductions).  Section 62(a)(1) states the general                         
            rule that trade or business deductions are allowed for such                               
            purpose only "if such trade or business does not consist of the                           
            performance of services by the taxpayer as an employee".                                  
            Consequently, for employed individuals, section 162 trade and                             
            business deductions are ordinarily itemized deductions.  Secs.                            
            161 and 162; see Alexander v. Commissioner, T.C. Memo. 1995-51,                           
            affd. 72 F.3d 938 (1st Cir. 1995).  Work-related expenses                                 
            incurred by an independent contractor, on the other hand, are                             
            deductible above the line under section 62(a)(1).                                         
                  Petitioners contend that the legal fees and costs were                              
            incurred in petitioner's capacity as an independent contractor,                           
            rather than as an employee.  Petitioners state that respondent                            
            "has adduced no evidence to dispute * * * [petitioner's]                                  
            independent contractor status."  Therefore, petitioners assert                            
            that the deductions are not itemized deductions but above-the-                            
            line Schedule C deductions.  Respondent, on the other hand, avers                         
            that petitioners have presented no evidence entitling them to                             
            deduct the expenses on Schedule C.  We agree with respondent.                             
                  The Code does not define the term "employee".  Whether the                          
            employer-employee relationship exists is a factual question.                              
            Weber v. Commissioner, 103 T.C. 378, 386 (1994), affd. 60 F.3d                            
            1104 (4th Cir. 1995).  Among the relevant factors in determining                          
            the nature of an employment relationship are the following:  (1)                          
            The degree of control exercised by the principal over the details                         

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