Edward Charles Jones - Page 15

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          Techmatics testified at trial.  “A contract purporting to create            
          an employer-employee relationship will not control where the                
          common law factors (as applied to the facts and circumstances)              
          establish that the relationship does not exist.”  Profl. & Exec.            
          Leasing, Inc. v. Commissioner, 89 T.C. at 233.  It was                      
          petitioner’s relationship with the Navy and the needs of the Navy           
          with respect to his projects that controlled the details of                 
          petitioner’s services.                                                      
               In sum, the facts and circumstances do not indicate an                 
          employer-employee relationship between petitioner and Techmatics.           
          The Court holds that petitioner was an independent contractor of            
          Techmatics during 1998.  Accordingly, petitioner is entitled to             
          deduct the claimed home office expenses as trade or business                
          expenses for the year at issue.  Petitioner is sustained on this            

               7    As respondent has not sought to increase the deficiency           
          by the amount of self-employment tax due under sec. 1401(a) in              
          the event petitioner was found to have an independent contractor            
          relationship with Techmatics, the Court makes no allowance for              
          such an increase.  Cf. Wickum v. Commissioner, T.C. Memo. 1998-             
          270.  The amounts paid petitioner for his services nonetheless              
          represented gross receipts from a trade or business activity and            
          did not represent wages or salaries.  These amounts should have             
          been reported on Schedule C of the return.  As noted in the                 
          opinion, however, Social Security taxes were withheld from the              
          compensation amounts paid to petitioner, and presumably                     
          Techmatics also paid an equivalent amount in Social Security                
          taxes as a purported employer.                                              

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