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Respondent determined a deficiency in petitioner’s Federal
income tax for the taxable year 1993 in the amount of $2,072.
After a concession by respondent,1 the issues remaining for
decision are: (1) Whether settlement proceeds received in 1993
by petitioner are includable in gross income arising from her
employment or are gross receipts or sales income reportable on
Schedule C, Profit or Loss From Business; (2) whether legal fees
and costs associated with the settlement are itemized deductions
properly claimed on Schedule A, Itemized Deductions, or ordinary
and necessary business expenses deductible on Schedule C; and (3)
whether a payment of $3,728.65 to petitioner’s former spouse,
Steven E. Anderson (Mr. Anderson), is deductible on petitioner’s
Schedule C. The first two issues turn on whether petitioner was
an independent contractor for the period August 14, 1987, through
February 29, 1988.
Background
The stipulation of facts and the attached exhibits are
incorporated herein by this reference. At the time the petition
was filed, petitioner resided in Hillsboro, Illinois.
Petitioner specializes in the field of modeling. She has an
associate’s degree and about 5 years of internal training with
1 Respondent concedes that for 1993, petitioner is
entitled to deduct additional Schedule C, Profit or Loss From
Business, expenses of $2,740, which were raised for the first
time at trial, for “Shawnee Studios”, a modeling consulting
service in business during 1993.
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