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duties would include preparing meals, cleaning, laundry, typing
letters, and answering the phone. After petitioner agreed to
perform the duties, Mr. Dixon offered her the room and board.
On August 28, 1999, petitioner signed an occupancy agreement
prepared by Mr. Dixon and moved into the residence. The
agreement contained the following terms and conditions: (1)
Petitioner was to occupy a room at Mr. Dixon’s residence for a
continued period of time which could be terminated by either
party with 1-week notice; (2) petitioner was to perform various
duties at the residence for 15 hours per week in exchange for the
room and board; (3) petitioner was to pay 20 percent of the
monthly utilities used at the residence during the occupancy; (4)
the utilities could be paid by providing additional work credited
at a rate of $13 per hour; and (5) Mr. Dixon reserved the right
to terminate the agreement immediately for any misconduct,
nuisance, or failure to perform any duties.
Petitioner never filled out a Form W-4, Employee’s
Withholding Allowance Certificate, nor discussed with Mr. Dixon
how she would be treated for tax purposes. She testified that
Mr. Dixon told her the room and board would not be taxable.
Petitioner believed that the 15 hours per week consisted of
10 hours for the room and board and 5 hours for the utilities.
Although not specifically mentioned in the occupancy agreement,
petitioner testified that she was paid $13 an hour for each hour
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