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Court issued its Memorandum Opinion in W. Mgmt., Inc. v.
Commissioner, T.C. Memo. 2003-162, affd. in part and remanded in
part 176 Fed. Appx. 778 (9th Cir. 2006), and we incorporate
herein the facts set forth in that opinion.
Background
In 1981, Robert E. Kovacevich incorporated petitioner, a
Washington C corporation. Petitioner’s only source of income was
from the provision of Mr. Kovacevich’s legal services. Mr.
Kovacevich did not receive predetermined wages from petitioner
but, instead, received funds from petitioner as his needs arose.
In 1994 and the first quarter of 1995, petitioner paid Mr.
Kovacevich $132,000 and $33,250, respectively. Petitioner
classified these payments as “loans” on its corporate ledger and
did not file Forms 1099-MISC, Miscellaneous Income, relating to
the payments.
On April 28, 1999, respondent sent petitioner a notice of
determination in which respondent determined that Mr. Kovacevich
was an employee of petitioner for Federal employment tax purposes
and petitioner was not entitled, pursuant to section 530 of the
Revenue Act of 1978, Pub. L. 95-600, 92 Stat. 2885 (Section 530),
to relief from such classification. In addition, respondent
1(...continued)
the Internal Revenue Code, as amended, and all Rule references
are to the Tax Court Rules of Practice and Procedure.
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Last modified: November 10, 2007