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Respondent does not have an original or copy of the Form 1040X on
file with the Internal Revenue Service. At trial, petitioner
gave a second Form 1040X, signed on March 6, 2000, to respondent.
Petitioner reported the settlement proceeds of $15,000 on her
Schedule C, as gross income, on each Form 1040X. Petitioner
further deducted, on each Form 1040X, attorney’s fees and costs,
related to the litigation, under legal and professional services
on Schedule C. However, on the Form 1040X signed on March 6,
2000, petitioner further deducted an amount paid to Mr. Anderson
from the settlement award.
In a notice of deficiency, respondent determined that
settlement proceeds of $15,000 received by petitioner were fully
includable in gross income and attorney’s fees and costs
associated with the litigation were Schedule A miscellaneous
itemized deductions, subject to the 2-percent limitation under
section 67. Lastly, respondent determined that petitioner is not
entitled to deduct payments made to her former husband from the
settlement award.
Independent Contractor or Employee
To determine whether a taxpayer is an independent contractor
or an employee, common-law rules apply. See Weber v.
Commissioner, 103 T.C. 378, 387 (1994), affd. per curiam 60 F.3d
1104 (4th Cir. 1995). Courts consider various factors to
determine whether an employment relationship exists between the
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