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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
issue.7
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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