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With respect to the case at hand, Mr. Yeagle is an officer of
petitioner who performed substantial services for petitioner,
including soliciting business, ordering supplies, entering into
oral and written agreements, overseeing finances, collecting money
owed to petitioner, hiring and firing independent contractors,
obtaining clients, maintaining client relationships, and generally
managing petitioner’s business affairs. Petitioner distributed all
of its net income to the Yeagles. Those distributions were
compensation for the services provided to petitioner by Mr. Yeagle.
Petitioner contends that the amounts paid to Mr. Yeagle were
distributions of its corporate net income, rather than wages, and
that Mr. Yeagle properly reported the net income as nonpassive
income from an S corporation on his Forms 1040. Mr. Yeagle’s
reporting the distributions as nonpassive income from an S
corporation has no bearing on the Federal employment tax treatment
of those wages. Veterinary Surgical Consultants, P.C. v.
Commissioner, supra at ___ (slip op. at 8). We hold that Mr.
Yeagle is an employee of petitioner for the period at issue and, as
such, the payments to him from petitioner constitute wages subject
to Federal employment taxes.
Despite our determination that Mr. Yeagle is an employee of
petitioner and that the payments to him from petitioner are wages
subject to Federal employment taxes, Section 530 allows petitioner
relief from employment tax liability if two conditions are
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