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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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