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has consistently treated the individual as not being an employee
on all tax returns for periods after December 31, 1978; and
(3) the taxpayer has a reasonable basis for not treating the
individual as an employee. Sec. 530(a)(1), (3). With respect to
the case at bar, respondent has conceded that petitioner meets
the first and second of the above requirements. Rather, the
parties dispute whether petitioner had a reasonable basis for not
treating Sadanaga as an employee.
Concerning the existence of a reasonable basis for purposes
of Section 530(a)(1), Section 530(a)(2) sets forth three
statutory safe havens. Reliance upon any of the circumstances
enumerated in subparagraph (A), (B), or (C) of Section 530(a)(2)
is deemed sufficient to establish the requisite reasonable basis.
Subparagraph (A) lists judicial precedent, published
rulings, technical advice with respect to the taxpayer, or a
letter ruling to the taxpayer. The amended petition alleges:
The Petitioner did not treat its sole shareholder,
Kenneth K. Sadanaga, as an employee during any part of
1997 and 1998, and reasonable basis exists for not
treating Kenneth K. Sadanaga as an employee for the
said periods based on a judicial precedent contained in
the opinion of Texas Carbonate Company v. R.L. Phinney,
307 F.2d 289 (5th Cir.), cert denied, 371 U.S. 940
(1962) and based on the rules concerning the employer
and employee relationship as outlined by the common
law, as mentioned in Section 530 of the Revenue Act of
1978 and I.R.C. Section 3121(d)(2).
On brief, petitioner reiterates reliance on Tex. Carbonate Co. v.
Phinney, 307 F.2d 289 (5th Cir. 1962), and cites as well to
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