Barium & Chemicals, Inc. - Page 13

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          department.  In particular, Exley’s work related to the sales               
          department’s activities of recording of sales, tracking and                 
          confirming orders, and answering telephones.  Petitioner retained           
          the benefits of Exley’s employment with the corporation.                    
          Petitioner and E. Naylor were aware that Exley was working for              
          the corporation and being paid compensation for her work.                   
          Petitioner continued to allow Exley to be paid compensation, even           
          if it was paid indirectly through A. Pavlik.  The settlement                
          agreement, and subsequent amendments, provided Exley backpay and            
          continued her compensation in the future, while noting the                  
          ongoing dispute over her status as an employee.                             
               With respect to the relationship the parties thought they              
          were creating, petitioner focuses on the lack of board approval             
          over Exley’s rehiring.  Petitioner also asserts that, because               
          Exley did not have the same benefits as other employees of                  
          petitioner, she was not an employee.                                        
               Even where parties expressly agree to create an arrangement            
          for compensation outside of the employer-employee relationship,             
          the evidence, and not characterization of the relationship by the           
          parties, determines employment tax liability.  See Charlotte’s              
          Office Boutique, Inc. v. Commissioner, 121 T.C. 89, 105-106                 
          (2003); Ewens & Miller, Inc. v. Commissioner, supra at 268-269;             
          sec. 31.3121(d)-1(a)(3), Employment Tax Regs.  A fortiori, an               
          ongoing family dispute cannot dictate Federal employment tax                

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