Jennifer L. Rusley - Page 9




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               behalf of, and the transmission to, his principal * * *                
               of orders from wholesalers, retailers, contractors, or                 
               operators of hotels, restaurants, or other similar                     
               establishments for merchandise for resale or supplies                  
               for use in their business operations * * *.                            
          Sec. 3121(d)(3)(D).  An individual can be a “statutory employee”            
          under section 3121(d)(3) only if that individual is not a common            
          law employee under section 3121(d)(2).  Ewens & Miller, Inc. v.             
          Commissioner, supra.  Generally, as statutory employees under               
          section 3121(d)(3)(D), “City or traveling salesmen who sell to              
          retailers or to the others specified, operate off the premises of           
          their principals, and are generally compensated on a commission             
          basis”.  Sec. 31.3121(d)-1(d)(3)(iv)(a), Employment Tax Regs.               
               A common law employee generally reports business expenses on           
          Schedule A, subject to limitations under section 67, but a                  
          statutory employee under section 3121(d)(3)(D) is not an employee           
          for purposes of section 62 and may deduct business expenses on              
          Schedule C.  See sec. 3121(d); see also Prouty v. Commissioner,             
          T.C. Memo. 2002-175 (illustrating that a statutory employee may             
          reflect business income and expenses in full on Schedule C);                
          Lickiss v. Commissioner, T.C. Memo. 1994-103 (holding that the              
          taxpayer was a common law employee and that any related business            
          expenses were to be reported on Schedule A, subject to the                  
          limitations under section 67); Rev. Rul. 90-93, 1990-2 C.B. 33              
          (holding that a statutory employee under section 3121(d)(3) for             
          employment tax purposes is not a common law employee for purposes           







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