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treated as an employee of Strategic “for federal or state tax
purposes”. Petitioner agreed therein that he “will pay all
applicable federal and state income taxes, self-employment taxes,
sales taxes, local taxes, and/or local license taxes”. It is
also stated in the agreement that “remuneration will consist
solely of commissions, overrides and/or bonuses relating to the
sales or other output derived from in-person sales, solicitations
or orders from ultimate consumers”.
On February 10, 1996, petitioner’s mother, on behalf of
petitioner, purchased a money order payable to Strategic for
$328.14. This was the cost to initiate a distributorship with
Strategic. Petitioner’s sponsor (or upline distributor) was Luan
Schaff-Hahn (Ms. Schaff-Hahn).
There were downline independent representatives assigned to
be below petitioner, and he received periodic checks from sales
generated downline. Petitioner also received commission reports.
Petitioner received a Form 1099-MISC for tax year 1996 from
Strategic showing that he received $19,200 as nonemployee
compensation and $1,155 for prizes and awards. Petitioner
reported this income on Schedule C filed with his 1996 return.
The parties orally stipulated that petitioner was not an
employee of Strategic at any time, did not lend funds to
Strategic, and never purchased or held stock of Strategic. The
parties orally further stipulated that the amounts petitioner
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Last modified: May 25, 2011