- 8 -
Regs., supra. Petitioner contends that it did not satisfy the
ownership test because all of its stock was held by a
nonemployee, Ms. Felton. That said, petitioner has done nothing
to convince us that Ms. Felton is anything other than an
employee.
Section 448(d)(2) does not adequately define the term
“employee”,7 but as a general rule, when Congress has used the
term without defining it, we have concluded that Congress
intended to describe the conventional relationship as understood
by common law. See, e.g., Nationwide Mut. Ins. Co. v. Darden,
503 U.S. 318, 322-323 (1992). Likewise, both the Court and the
Commissioner have adopted common-law rules to distinguish
employees from independent contractors. See Weber v.
Commissioner, 103 T.C. 378, 387 (1994), affd. 60 F.3d 1104 (4th
Cir. 1995); Rev. Rul. 87-41, 1987-1 C.B. 296; see also Nationwide
Mut. Ins. Co. v. Darden, supra at 324. The primary feature in
this analysis is control over the manner and means by which an
employee performs his or her services. See Rev. Rul. 87-41,
supra; see also Clackamas Gastroenterology Associates, P.C. v.
Wells, 538 U.S. 440, 448 (2003) (describing the element of
control as the “principal guidepost”); Ron Lykins, Inc. v.
Commissioner, T.C. Memo. 2006-35.
7 Sec. 1.448-1T(e)(5)(ii), Temporary Income Tax Regs.,
supra, does contain a definition of employee, but it does not
appear to be helpful in these circumstances.
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