Shawnee E. Tefteller - Page 11




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          that petitioner was an employee of Mr. Gans and his related                 
          businesses.                                                                 
          Settlement Award                                                            
               Based upon the above finding, we must next decide how the              
          settlement award is reportable on petitioner’s income tax return            
          for 1993.                                                                   
               At trial, petitioner conceded that the settlement award                
          should be reported on petitioner’s 1993 Federal income tax                  
          return.  However, petitioner contends that it is properly                   
          reported as Schedule C income, as reflected on both amended                 
          returns, Forms 1040X, rather than as ordinary income.                       
               It is clear that the lawsuit initiated by petitioner against           
          Mr. Gans and his related businesses was for unpaid compensation             
          for services which she rendered.  Because petitioner was not an             
          independent contractor during the relevant period, as noted                 
          above, she is not entitled to report the settlement proceeds as             
          income on her Schedule C; rather, it is includable in gross                 
          income as from other sources.                                               
               Respondent is sustained on this issue.                                 
          Attorney’s Fees and Costs                                                   
               To determine whether legal expenditures are business or                
          personal expenditures, one looks to the “origin and character of            
          the claim with respect to which an expense was incurred”.  United           
          States v. Gilmore, 372 U.S. 39, 49 (1963). “Litigation expenses             






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