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as a common-law employee, as opposed to an independent contractor
or statutory employee.
On balance, considering the record and weighing all of the
factors, we conclude that petitioner was a common-law employee
and not an independent contractor. Since petitioner was not an
independent contractor, he therefore was not a statutory
employee. See sec. 3121(d)(3); Lickiss v. Commissioner, T.C.
Memo. 1994-103. Petitioner is not entitled to report gross
income and claim expenses on Schedule C. Accordingly, we hold
for respondent.
2. Cost of Goods Sold
The cost of goods purchased for resale in a taxpayer’s
business is an offset to gross receipts in computing gross
income. See Metra Chem Corp. v. Commissioner, 88 T.C. 654, 661
(1987); Max Sobel Wholesale Liquors v. Commissioner, 69 T.C. 477
(1977), affd. 630 F.2d 670 (9th Cir. 1980); Thorpe v.
Commissioner, T.C. Memo. 1998-123; sec. 1.61-3(a), Income Tax
Regs. Although cost of goods sold is not a deduction and,
therefore, is not subject to the limitations on deductions, any
amount allowed as cost of goods sold must be substantiated. See
sec. 6001; Ranciato v. Commissioner, T.C. Memo. 1993-536; sec.
1.6001-1(a), Income Tax Regs.
Petitioner subtracted $5,914 in 1996 and $5,544 in 1997 for
cost of goods sold in IBC’s business. For the same reasons as
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