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Mr. McNamara would have continued to do the same farming
jobs even if there had been no lease agreement.
On February 1, 1992, Mrs. McNamara also entered into a
purported Employment Agreement with McNamara Farms, signed by Mr.
McNamara as President. The Employment Agreement provided that
Mrs. McNamara was to perform the following duties for the farming
business: Bookkeeping, preparation of meals for employees, field
work, assistance in providing security for machinery and
inventory, and such other usual and customary duties as may be
delegated by the employer from time to time. In essence, the
Agreement memorialized almost the same duties that Mrs. McNamara
had been performing since Mr. and Mrs. McNamara began farming
together. The Employment Agreement further provided that any
portion of compensation not paid in kind (e.g., grain crops)
"will be subject to required FICA social security tax and income
tax withholding." The Agreement also provided that Mrs. McNamara
could participate in the McNamara Farms medical reimbursement
plans and that she would be provided medical insurance coverage
for herself and her dependents.
For all 3 years in issue, petitioners filed their Forms 1040
income tax returns as married individuals filing joint returns.
Mr. McNamara stated his occupation was "farmer" and Mrs. McNamara
stated her occupation was "bookkeeper". On their Schedules E,
Supplemental Income and Loss, petitioners reported that they
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Last modified: May 25, 2011