Anthony S. D'Acquisto - Page 5




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          income reported on Forms W-2 in the amount of $179,578 and other            
          “talent fees” in the amount of $9,595.  Although petitioner                 
          testified that he performed jobs for “hundreds of different                 
          agencies”, he received and filed with his 1994 return only 10               
          Forms W-2 issued from the agencies and in some cases directly               
          from the hiring companies.  Petitioner claimed 1994 Schedule C              
          business expense deductions in the amount of $65,510.2  On                  
          Schedule SE, Self-Employment Tax, petitioner computed his self-             
          employment tax liability as follows:                                        
               Gross profit from Schedule C            $189,173                       
               (Less expenses)                         (65,510)                       
               Net profit from Schedule C              123,663                        
               (Less “Statutory Wages”)3               (117,391)                      
               Reported net profit on Schedule SE        $6,272                       
               In a notice of deficiency respondent determined that                   
          petitioner was not a qualified performing artist within the                 
          meaning of section 62(b)(1).  Respondent determined that                    
          petitioner was an employee, and recharacterized 94.93 percent of            
          petitioner’s Schedule C business expenses, or $62,187, as job-              
          related Schedule A miscellaneous itemized deductions, subject to            
          the 2-percent limitation under section 67.  Based upon the                  
          adjustments to Schedule A, respondent determined petitioner’s               

               2 The substantiation of petitioner’s business expense                  
          deductions is not at issue in this case.                                    
               3 Petitioner arrived at “Statutory Wages”, or $117,391, by             
          applying the fraction from Forms W-2 income in the amount of                
          $179,578 over the total income reported on Schedule C in the                
          amount of $189,578, which equals 94.93 percent.                             





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