Water-Pure Systems, Inc. - Page 2




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          Tax Act (FUTA) for 1996, 1997, and 1998.  The issues for decision           
          are:  (1) Whether Martin L. Ridge (Ridge) was an employee of                
          petitioner for Federal employment tax purposes during 1996                  
          through 1998 and, if so, (2) whether petitioner is entitled to              
          relief under section 530 of the Revenue Act of 1978, Pub. L. 95-            
          600, 92 Stat. 2885, as amended (Section 530).                               
               Unless otherwise indicated, all section references are to              
          the Internal Revenue Code in effect for the years in issue, and             
          all Rule references are to the Tax Court Rules of Practice and              
          Procedure.  For convenience, FICA and FUTA taxes are collectively           
          referred to as employment taxes.                                            
                                  FINDINGS OF FACT                                    
               The facts in this matter were deemed stipulated pursuant to            
          Rule 91(f).  The stipulated facts are incorporated in our                   
          findings by this reference.                                                 
          Petitioner’s Organization and Operations                                    
               Petitioner was incorporated in Pennsylvania on July 19,                
          1985, and has at all relevant times operated as an S corporation.           
          Petitioner’s principal place of business was located in                     
          Langhorne, Pennsylvania, at the address of Ridge’s personal                 
          residence, when the petition was filed in this case.                        
               Since its organization and through the years in issue,                 
          petitioner provided sales and service of water purification                 
          systems.  This activity was petitioner’s only business and only             






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