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own computer, fax machine, and cellular phone for use in his
sales activities, but he paid no rent or other business expenses
(e.g., utilities, office supplies and equipment, furniture, and
copier) in connection with the Irvine office. Those expenses
were paid by Manulife. In the Irvine office, Manulife employed
two support staff employees to assist petitioner.
Manulife issued Forms W-2, Wage and Tax Statement, to
petitioner reporting wages or other compensation of $496,053 and
$436,891 for 1999 and 2000, respectively. The Forms W-2 also
reported that Manulife withheld the applicable payroll taxes.
The Forms W-2 further indicated that petitioner participated in
Manulife’s health insurance program, pension plan, and deferred
compensation plan. Manulife did not check box 15 for statutory
employee.7
Petitioners timely filed a Form 1040, U.S. Individual Income
Tax Return, for each of the years in issue. Petitioners attached
to each return, inter alia, a Schedule C, Profit or Loss From
Business. On each Schedule C, petitioner identified his
principal business or profession as life insurance sales and his
business address as the Irvine office. Petitioner reported the
following on the Schedules C:
7 We note that the 2000 Form W-2 box 15 for statutory
employee contained a handwritten “X”.
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