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III. Employment Status
The parties in this case focus their dispute on whether
petitioner is to be considered an employee or an independent
contractor for Federal income tax purposes. In general, business
expenses of an independent contractor, if otherwise allowable,
are deductible in full pursuant to section 62(a)(1) and are
reported on Schedules C. Unreimbursed business expenditures of
an employee, on the other hand, are typically permitted only as
miscellaneous itemized deductions under section 67, to the extent
in excess of 2 percent of adjusted gross income, and are reported
on Schedules A, Itemized Deductions. Petitioners maintain that
petitioner is an independent contractor; respondent characterizes
petitioner as an employee.
Neither “independent contractor” nor “employee” is expressly
defined in the Internal Revenue Code for purposes of Schedule C
versus Schedule A deductions. Alford v. United States, 116 F.3d
334, 335-336 (8th Cir. 1997); Weber v. Commissioner, 103 T.C.
378, 386 (1994), affd. 60 F.3d 1104 (4th Cir. 1995). The Supreme
Court, however, has established that “‘when Congress has used the
term “employee” without defining it, we have concluded that
Congress intended to describe the conventional master-servant
relationship as understood by common-law agency doctrine.’”
Nationwide Mut. Ins. Co. v. Darden, 503 U.S. 318, 322-323 (1992)
(quoting Cmty. for Creative Non-Violence v. Reid, 490 U.S. 730,
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