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The Business
Petitioner’s business is a dance studio that offers classes
in dance, gymnastics, martial arts, and other fitness-related
activities.
Petitioner is owned and operated by Denise Lopez (Ms.
Lopez), who, in 1997, purchased the business as a sole
proprietorship, which was doing business as “Champion Studio”.
Ms. Lopez incorporated the business in 1998 under the name
“Images in Motion of El Paso, Inc.”,2 but continued conducting
business as “Champion Studio”.
In 2001, the IRS examined petitioner’s taxable years 2000
and 2001 to determine whether it had complied with Federal
employment tax laws. Specifically, the examination was used to
determine whether petitioner had properly classified its dance
instructors (instructors) as independent contractors rather than
employees. The IRS conducted the examination on the basis of
information provided by an informant--who was an instructor at
petitioner’s studio. The Form 3449-CG, Referral Report, states
that the instructors were issued “employee manuals” and were
required to follow the directives set out in those manuals.
Additionally, the referral states that the instructors could be
fired if they failed to attend work.
2The record does not indicate whether petitioner is a C or S
corporation.
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Last modified: May 25, 2011