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following: (1) Petitioner has not treated any of the beauticians
as employees for any period; (2) petitioner has filed all Federal
tax returns (including information returns) with respect to each
beautician on a basis consistent with petitioner’s treatment of
such individual as not being an employee; and (3) petitioner has
a reasonable basis for not treating the beauticians as an
employee. Revenue Act of 1978, sec. 530(a)(1), (3), 92 Stat.
2885, 2886.
Petitioner failed to meet the technical requirements of
section 530. First, petitioner conceded that he treated the
beauticians as employees for the first quarter of 1994, thus
violating the first requirement that the beauticians were not
treated as employees at any time. Section 530(a)(3) further
clarifies this requirement by providing that if the “taxpayer (or
a predecessor)” treated any individual holding a “substantially
similar position as an employee”, then section 530 relief is not
available to the taxpayer. Revenue Act of 1978, sec. 530(a)(1),
(3), 92 Stat. 2885, 2886. In the present case, petitioner also
conceded that his predecessor treated her beauticians as
employees, albeit they were not the same individuals working
under petitioner,6 although petitioner did not consistently treat
6 We note that the statute does not require the
individuals to be identical under predecessor and petitioner;
rather, the analysis focuses on whether individuals were in
substantially similar positions under both circumstances.
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Last modified: May 25, 2011