TAX COURT OPINION

Case: Qunnia Shantel Hatch
Docket Number: 19685-09
Judge: Paris
Opinion Type: memo
Filed: 02/23/2012
Pages: 6

T.C. Memo. 2012-50 UNITED STATES TAX COURT QUNNIA SHANTEL HATCH, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent Docket No. 19685-09. Filed February 23, 2012. ' Qunnia Shantel Hatch, pro se. Joel D. McMahan, for respondent. MEMORANDUM FINDINGS OF FACT AND OPINION (cid:16)042 PARIS, Judge: On May 18, 2009, respondent sent to petitioner a notice of deficiency determining a deficiency in Federal income tax for taxable year 2007 of SERVED FEB 2 3 2012 - 2 - $1,966. The issues for decision are whether petitioner is liable for the deficiency in Federal income tax relating to $4,451 of unreported incóme for the tax year at issue and whether petitioner is liable for a penalty under section 66731 for instituting or maintaining proceedings primarily for delay and for maintaining a frivolous position. FINDINGS OF FACT . Some of the facts have been stipulated and are so found. At the time the petition was filed, petitioner lived in Florida. During 2007 petitioner worked part time for North South Florida Rehab Inc. (North South), in addition to her full-time job. North South hired petitioner on an as-needed basis. There was no written contract signed between the parties. Petitioner believed that she was an employee on the basis of documents representing the relationship between herself and North South. However, North South considered her an independent contractor. Petitioner typically performed clerical duties, including inputting of data, filing, and billing. North South paid petitioner using corporate checks and provided her a Form 1099-MISC, Miscellaneous Income, for tax purposes. No 1All section references are to the Internal Revenue Code in effect for the tax ÿear at issue, and all Rule references are to the Tax Court Rules of Practice and Procedure, unless otherwise indicated. - 3 - income tax was withheld from the paýments, and North South did not extend to her benefits that it offered its employees Petitioner timely filed her 2007 Federal income tax return and did not , include the payments from North South in her income. Respondent sent to petitioner a notice of deficiency determining that petitioner failed to include in income the nonemployee compensation paid to her by North South. The notice of deficiency also determined that petitioner failed to pay self-employmerit tax on the nonemployee.compensation; however, respondent has coriceded this issue. OPINION - .Petitioner concedes that she received $4,451 of income from North South. She argues that the -income she received was not taxable income within the meaning ofthe law, as she was an employee of North South, and that North South should not have issued her a Form 1099-MISC.2 Alternatively, petitioner argues that the amounts paid by North South were a tax,free contribution to her. 2Sec. 31(a)(1) provÌdes to'an employ e a cNdit against the emplÀyee's income tax obligation with respect to her wages for "[t]he amount withheld as tax under chapter 24". Sec. 1.31-í(a), Income Tax Regs., limits the credit to "[t]he tax deducted and yvithheld at the source upon wages under chapter 24". Further, the credit is provided to the emöloyee if the tax has lÈeÈactuálly withheld at the source even if the tax has not been paid by employer to the Government. sec:31(a)(1) credit is not available tolpetitioner as she was not ti.eated as an employee by North South and North South never actually withheld any,amounts from her wages. Ick The Section 61 próvidès that gross income includes all income from whatever source derived, specifically including compensation for services. Sec. 61(a)(1) Compensation is further defined to include wages, salaries, and bonusek Sec. 1.61-2(a)(1), Income Tax Regs. Exclusions from income exist if the t¼xþayer can establish a specific legislative authorization to exclude income from taxationland are a matter of legislative gráce. New Colonial Ice Co. v. Helvering, 292 U.S. 435, 440 (1934). Petitioner argued that she was an employee ánd should not have been issued a Form 1099-MISC. However, given that respondent conceded the self- emplöyment tax issue, it makes no difference wliether the wages were eaï·ned in the context of being an employee or a contractor. Petitioner-conceded that she received the amóunts at issue from North South in exchange for her services; therefore, she has gross income from compensation. Petitioner also argués thát because she was an employee, the amount should be excluded from income as a nontaxable contribution to her froni North Soutli Petitioner has not demonstrated that she was an employee for 2007. Additionall , even if she was an employee, the ámounts are still taxable. Sectión 102(a) rovides that gross income does not include the value of ioped acquired by gift, bequest, or inheritance. However, amounts "tránsferred by or for an employer to, - 5 - or for the benefit of, an employee" are not excludible from income. Sec. 102(c). Only in "exceptional" circumstances is a transfer between an employer and an employee considered a gift. Commissioner v. Duberstein, 363 U.S. 278, 287 (1960). The legislative history of section 102 indicates that a gift may be made by an employer to an employee if it is exclusively for personal reasons, if it is entirely unrelated to the employment relationship, and if it reflects no anticipation of business benefit. See S. Rept. No. 99-313, at 47-49 (1986), 1986-3 C.B. (Vol. 3) 1, 47-49. There is no evidence that the amounts paid to petitioner are anything other than wages paid for the clerical services she performed and thus are not excludible from income. Section 6673(a) authorizes the Tax Court to impose a penalty not in excess of $25,000 on a taxpayer for proceedings instituted primarily for delay or in which the taxpayer's position is frivolous or groundless. Respondent has moved for imposition of such a penalty because of petitioner's lack of cooperation and numerous filings with the Court. Petitioner submitted a large number of documents in efforts to explain her position to the Court. While a section 6673 penalty is not appropriate at this time, the Court warns petitioner that continuing to advance groundless arguments or accusations may result in penalties in the future. - 6 - In reaching these holdings, the Court has considered all arguments made and, to the extent not mentioned, concludes that they are moot, irrelevant, or without merit. To reflect the foregoing and the concessions of the parties, Decision will be entered . under Rule 155.