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bookkeeper for petitioners and the Association for the years in
issue and several years prior. At trial, respondent made various
objections to portions of Mr. Modak's testimony, based on lack of
personal knowledge,2 relevance, and hearsay, on which we deferred
ruling. We hereby overrule those objections and admit the
challenged testimony.
Employee or Independent Contractor
The first issue is whether Dr. Pariani provided services to
the Association as an employee or as an independent contractor.
If Dr. Pariani was an employee of the Association, several
consequences follow. First, petitioners may not deduct
contributions to a Keogh plan. See secs. 401(c)(1),
404(a)(8)(C), 1402(a), (c); Jacobs v. Commissioner, T.C. Memo.
1993-570. Second, petitioners are liable for the 10-percent
excise tax on the nondeductible contributions. Sec. 4972(a); see
Frick v. Commissioner, T.C. Memo. 1989-86, affd. without
published opinion 916 F.2d 715 (7th Cir. 1990). Finally,
petitioners are not liable for the tax on self-employment income,
and in 1992 would not be entitled to the deduction for one-half
of self-employment tax. Secs. 1401(a), 1402(b), 164(f). This
Court has described the question of whether a taxpayer is an
2 We conclude that Mr. Modak's longstanding relationship
with Dr. Pariani and the Association as bookkeeper and tax return
preparer for both gave him sufficient personal knowledge to
testify with respect to the matters challenged by respondent.
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