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an employee”, sec. 530(a)(2). A taxpayer is deemed to have a
reasonable basis if the taxpayer established its “treatment of
such individual * * * was in reasonable reliance on”:
(A) judicial precedent, published rulings, technical
advice with respect to the taxpayer, or a letter ruling
to the taxpayer;
(B) a past Internal Revenue Service audit of the
taxpayer in which there was no assessment attributable
to the treatment (for employment tax purposes) of the
individuals holding positions substantially similar to
the position held by this individual; or
(C) long-standing recognized practice of a significant
segment of the industry in which such individual was
engaged. [Id.]
Courts have noted that, in addition to the safe harbors of
section 530(a)(2), a taxpayer may demonstrate any other
reasonable basis for the treatment of an employee for tax
purposes. See, e.g., Springfield v. United States, 88 F.3d 750,
753 (9th Cir. 1996); Boles Trucking, Inc. v. United States, 77
F.3d 236, 239 (8th Cir. 1996). The legislative history reveals
that the reasonable basis inquiry is to be liberally construed in
favor of the taxpayer. See H. Rept. 95-1748, at 5 (1978), 1978-3
C.B. (Vol. 1) 629, 633. Section 530(e)(4) places the burden of
proof on the Secretary if the taxpayer establishes a prima facie
case that it was reasonable not to treat an individual as an
employee, and the taxpayer has complied with the Secretary’s
reasonable requests for tax periods at issue.
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