                   T.C. Summary Opinion 2011-41



                     UNITED STATES TAX COURT



         JONATHAN C. AND SHAMANE C. LADUE, Petitioners v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 25208-09S.              Filed April 5, 2011.



     Jonathan C. and Shamane C. LaDue, pro sese.

     Randall B. Childs, for respondent.



     ARMEN, Special Trial Judge:   This case was heard pursuant to

the provisions of section 7463 of the Internal Revenue Code in

effect when the petition was filed.1   Pursuant to section

7463(b), the decision to be entered is not reviewable by any




     1
        Unless otherwise indicated, all subsequent section
references are to the Internal Revenue Code in effect for the
year in issue, and all Rule references are to the Tax Court Rules
of Practice and Procedure.
                                - 2 -

other court, and this opinion shall not be treated as precedent

for any other case.

     Respondent determined a deficiency in petitioners’ 2007

Federal income tax of $2,030.   In the Amendment to Answer

respondent asserted an increased deficiency of $3,037.     The sole

issue for decision is whether petitioners are liable for self-

employment tax under section 1401 on income received by

petitioner husband, a deputy sheriff, for off-duty services.       We

hold that petitioners are liable for self-employment tax.

                           Background

     This case was submitted fully stipulated under Rule 122, and

the stipulated facts are so found.      The stipulation of facts and

the attached exhibits are incorporated herein by this reference.

Petitioners resided in Florida when the petition was filed.     All

references to petitioner in the singular are to Jonathan C.

LaDue.

     During 2007, petitioner was employed as a deputy sheriff by

the Jacksonville Sheriff’s Office (JSO).     JSO permits deputies to

provide off-duty services for entities other than JSO.     JSO’s

General Order LIII.10 (JSO General Order) contains detailed

provisions that an officer must follow to obtain and maintain

off-duty work.

     Entities desiring to hire JSO deputies for off-duty services

must submit an application to the Secondary Employment Unit of
                                - 3 -

JSO.    A JSO job scheduler acts as a liaison between JSO and the

entity by completing the jobsite schedule for JSO employees

working for a particular entity, “ensuring employee attendance is

adhered to, and resolving employee/employer conflict when

appropriate.”    Entities that hire deputies for off-duty services

are required to pay an administrative fee to JSO for each hour of

off-duty service provided by each officer.    Working while off

duty is strictly voluntary; JSO deputies are not required to

perform off-duty services.

       The JSO General Order determines the off-duty minimum pay

rate, limits the maximum monthly hours of off-duty work, and

requires JSO deputies to wear their uniforms and monitor their

police radios when providing off-duty law enforcement-related

services.    Deputies providing off-duty services are also subject

to recall to regular duty by JSO.    While working off duty,

deputies are governed by all JSO policies, procedures, and

directives, and the JSO Watch Commander may suspend a deputy’s

off-duty work if the work or the officer does not meet policy

requirements.

       In 2007 petitioner earned $23,240 from his off-duty services

and included that amount on his 2007 Federal income tax return.

This amount was not included on the 2007 Form W-2, Wage and Tax

Statement, received from JSO.    Each of the entities that hired

petitioner for off-duty service paid petitioner directly and
                                - 4 -

issued Forms 1099-MISC, Miscellaneous Income, and employment

taxes were not withheld with respect to the amount earned from

off-duty services.

     In a notice of deficiency respondent determined that

petitioners failed to correctly report the amount of nonemployee

compensation received by petitioner in 2007.   However, respondent

later conceded that petitioners did report the correct amount of

nonemployee compensation but asserted that petitioners failed to

report or pay self-employment tax on the full amount.

     Petitioners contend that petitioner remained an employee of

JSO while working off duty and, therefore, that they are not

liable for self-employment tax.   In contrast, respondent argues

that petitioner was not an employee of JSO while working off

duty, and that petitioners are therefore liable for self-

employment tax.2

                            Discussion

     Generally, the Commissioner’s determinations are presumed

correct, and the taxpayer bears the burden of proving that those

determinations are erroneous.   Rule 142(a); Welch v. Helvering,

290 U.S. 111, 115 (1933).   The Commissioner may assert an

increased deficiency under section 6214(a), which grants the



     2
        The parties stipulated that “Mr. LaDue was not an
employee of the entities which hired him to perform off-duty
services, and which paid him nonemployee compensation during the
2007 tax year.”
                                 - 5 -

Court jurisdiction to redetermine a deficiency.       Garrison v.

Commissioner, T.C. Memo. 2010-261.       However, with respect to any

new matter and increases in deficiency pleaded in the answer, the

Commissioner bears the burden of proof.      Rule 142(a).   In the

instant case, we decide the issue on the evidence without regard

to the burden of proof.

     Section 1401 imposes a tax upon a taxpayer’s self-employment

income.   Self-employment income consists of gross income derived

by an individual from any trade or business carried on by such an

individual.    Sec. 1402(a).   The self-employment tax, however,

does not apply to compensation paid to an employee.      Sec.

1402(c)(2).

     Section 3121(d)(2) defines an employee as “any individual

who, under the usual common law rules applicable in determining

the employer-employee relationship, has the status of an

employee”.    That definition is made applicable for self-

employment tax purposes by section 1402(d).      Whether an

individual is an employee or an independent contractor is a

question of fact determined by application of common law

principles.    Hosp. Res. Pers., Inc. v. United States, 68 F.3d

421, 424 (11th Cir. 1995); Weber v. Commissioner, 103 T.C. 378,

386 (1994), affd. 60 F.3d 1104 (4th Cir. 1995); sec. 31.3401(c)-

1(b), (d), Employment Tax Regs.     The Court may consider various

factors in determining the relationship between the parties.
                                 - 6 -

Milian v. Commissioner, T.C. Memo. 1999-366.     No one factor,

however, is controlling.     Weber v. Commissioner, supra at 387.

After considering these factors, as discussed below, we conclude

that petitioner was not an employee of JSO but performed his off-

duty services as an independent contractor.

       First, petitioner’s off-duty services were performed for,

and were directly beneficial to, the third-party entity.      See

Milian v. Commissioner, supra (stating that performance of

services by the employee for the employer is implicit in an

employee relationship); March v. Commissioner, T.C. Memo. 1981-

339.     “Any benefit * * * [the department] received by an

increased police presence at petitioner’s off-duty assignments

was incidental and similar in nature to the benefit to a police

department when officers increase the police presence in a

community by driving their police cruisers home.”     Cicciari v.

Commissioner, T.C. Memo. 2003-179 (citing Milian v. Commissioner,

supra and March v. Commissioner, supra).

       A second factor of an employer-employee relationship is the

ability to select and discharge at will.     March v. Commissioner,

supra.     The mere approval from JSO to work off-duty jobs and the

ability to suspend if department policies were not adhered to do

not amount to the ability to hire and fire with regard to the

off-duty positions.     See Kaiser v. Commissioner, T.C. Memo. 1996-
                                - 7 -

526, affd. without published opinion 132 F.3d 1457 (5th Cir.

1997).

     Third, the source and method of payment may also help

establish whether an employer-employee relationship exists.

March v. Commissioner, supra.    All of the third-party entities

for which petitioner provided off-duty services operated

separately from the city of Jacksonville and JSO; the third-party

entities paid petitioner directly and treated him as an

independent contractor, issuing him Forms 1099.   The city of

Jacksonville did not include off-duty pay in petitioner’s Form W-

2.

     As did the departments in the March, Kaiser, and Milian

cases, JSO in this case exercises control over off-duty work in

that it has a detailed approval process and the officer is always

to abide by the policies, procedures, and directives of JSO.

However, the Court found in those cases, and we so find again in

the instant case, that the incidental control held by the

department relates solely to the on-duty employment relationship,

rather than to the details of the off-duty relationship.     Milian

v. Commissioner, supra; Kaiser v. Commissioner, supra; March v.

Commissioner, supra.   We find that JSO is looking after its own

interests in making sure that off-duty work does not interfere

with on-duty employment, that the JSO image is not tarnished, and
                               - 8 -

that JSO knows where its officers are located in case of an

emergency.

     Although there may be some factors that may point to an

employer-employee relationship between petitioner and JSO with

respect to petitioner’s off-duty work (i.e., establishing minimum

pay rates and requiring petitioner to wear his uniform), when

taken as a whole the facts establish that petitioner was self-

employed with respect to the off-duty services that he provided

to third-party entities.   Accordingly, we hold that the earnings

in dispute are earnings from self-employment, subject to the tax

imposed by section 1401.

                            Conclusion

     We have considered all of the arguments made by petitioners

and, to the extent that we have not specifically addressed those

arguments, we conclude that they do not support a conclusion

contrary to that reached herein.

     To reflect our disposition of the disputed issue,


                                            Decision will be entered

                                       for respondent in the amount

                                       of the increased deficiency of

                                       $3,037.
