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each of the four quarters of 1994, 1995, and 1996. On April 3,
1998, petitioner submitted to respondent a letter protesting the
proposed adjustments.
On October 5, 1998, respondent sent petitioner a letter
advising that there would be no change resulting from the audit of
petitioner’s Form 1120S for 1995. On November 17, 1998, respondent
issued to petitioner a Notice of Determination, in which respondent
determined that (1) Dr. Sadanaga was an employee of petitioner for
purposes of Federal employment taxes, and (2) petitioner was not
entitled to “safe harbor” relief from these taxes as provided by
section 530 of the Revenue Act of 1978, Pub. L. 95-600, 92 Stat.
2885 (Section 530). Attached to the Notice of Determination was a
schedule detailing the amount of the proposed Federal employment
taxes. Thereafter, petitioner filed with the Court a timely
petition seeking our review of respondent’s Notice of
Determination.
Discussion
Petitioner contends that Dr. Sadanaga was not its employee
and that it properly distributed its net income to Dr. Sadanaga, as
its sole shareholder, pursuant to section 1366. On the other hand,
respondent contends that Dr. Sadanaga was an employee of petitioner
because he was an officer of petitioner and performed substantial
services on petitioner’s behalf.
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