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lines of services may function mutually exclusively.3
Section 448(d)(2)(A) requires that “substantially all” of
petitioner’s activities must be devoted to the field of
engineering. Under section 1.448-1T(e)(4)(i), “substantially
all” is defined as 95 percent or more of the employees’ time
devoted to the performance of services within the field of
engineering. The temporary regulation further provides that for
purposes of determining whether the 95-percent rule is satisfied,
the performance of any activity incident to the actual
performance of engineering services is considered the performance
of services in that field.
Respondent contends that geotechnical testing is “incident
to” the qualifying field of engineering. The temporary
regulation states that activities incident to the performance of
services in a qualifying field include the supervision of
employees engaged in directly providing services to clients, and
the performance of administrative and support services incident
to such activities. Sec. 1.448-1T(e)(4)(i), Temporary Income Tax
Regs., 52 Fed. Reg. 22768 (June 16, 1987), as amended by T.D.
8329, 56 Fed. Reg. 485 (Jan. 7, 1991), T.D. 8514, 58 Fed. Reg.
68299 (Dec. 27, 1993). In this case, geotechnical testing of
soils and concrete is not within the field of engineering, nor is
3 During his testimony, Mr. Huseth referred to three other
geotechnical testing companies in the area that did not employ
any engineers on their staffs.
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