                  T.C. Summary Opinion 2001-101



                     UNITED STATES TAX COURT



         GEORGE A. AND LAURENE S. BEITEL, Petitioners v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 17769-99S.                      Filed July 5, 2001.



     George A. and Laurene S. Beitel, pro se.

     Robert V. Boeshaar, for respondent.


     CARLUZZO, Special Trial Judge:   This case was heard pursuant

to the provisions of section 7463 of the Internal Revenue Code in

effect at the time the petition was filed.   Unless otherwise

indicated, subsequent section references are to the Internal

Revenue Code in effect for the year in issue.   The decision to be

entered is not reviewable by any other court, and this opinion

should not be cited as authority.
                                - 2 -

     Respondent determined a deficiency of $126 in petitioners’

1997 Federal income tax.    The issue for decision is whether

certain deductions claimed on a Schedule C, Profit or Loss from

Business, included with petitioners’ 1997 Federal income tax

return should be treated as unreimbursed employee business

expenses.    The resolution of this issue depends upon whether

George A. Beitel was an independent contractor or an employee in

connection with services he provided as an adjunct professor at

certain universities in 1997.

Background

     Some of the facts have been stipulated and are so found.

Petitioners are husband and wife.    At the time the petition was

filed, they resided in Idaho Falls, Idaho.    References to

petitioner are to George A. Beitel.

     During 1997, in addition to his full time employment as an

engineer with the Idaho National Engineering and Environmental

Laboratory, petitioner, who holds a Ph.D. degree in physics, was

also an adjunct professor at Idaho State University (ISU) and at

the University of Idaho (UOI)(collectively, the universities).

     Petitioner taught at the universities and was compensated

for so doing on a course-by-course basis.    During the 1997 spring

semester, petitioner taught a class in Low Level Radioactive

Waste at ISU.   During the 1997 fall semester, petitioner taught a

class in Systems Engineering Principles at UOI.    Classes for
                                - 3 -

these courses were conducted on campus in classrooms provided by

the universities.   Petitioner prepared for classes and reviewed

student assignments from his home.      He communicated with and

received assignments from his students through e-mail on his home

computer, and he maintained a website on the Internet devoted to

his teaching activities at the universities.

     In addition to his course responsibilities, as an adjunct

professor, petitioner also supervised a thesis student and a

special topic student at UOI during 1997.      Petitioner

communicated with these students primarily through e-mail and

various off-campus meeting places.

     All of petitioner’s teaching assignments during 1997 were

subject to written contracts between himself and the

universities.   Among other things, each contract specified the

course to be taught or student to be supervised, the duration of

the assignment, and the amount and method of payment.       Each

contract also indicated that petitioner would be treated as an

employee of the university, albeit at least with respect to UOI,

the contract provided that petitioner enjoyed “very limited

[employee] benefits”.

     For 1997, each university issued to petitioner a Form W-2,

Wage and Tax Statement, reflecting the amounts paid to petitioner

for his services.   Both Forms W-2 classified amounts paid to

petitioner as wages.    Each university also withheld Social
                               - 4 -

Security, FICA, and Federal and State income taxes on the

payments.

     Petitioners filed a timely 1997 joint Federal income tax

return.   The taxable income reported on the return takes into

account their election to itemize deductions.   Income and

deductions attributable to petitioner’s teaching assignments are

reported on a Schedule C, Profit or Loss From Business, included

with that return.

     The adjustments made in the notice of deficiency reflect

respondent’s determination that in 1997 petitioner performed

services for the universities as an employee, not as an

independent contractor.

Discussion

     Whether an individual is an employee or an independent

contractor for Federal income tax purposes is a factual question

to be determined with reference to common-law principles of

agency.   See Nationwide Mut. Ins. Co. v. Darden, 503 U.S. 318,

322-325 (1992); Weber v. Commissioner, 103 T.C. 378, 386 (1994),

affd. 60 F.3d 1104 (4th Cir. 1995); Professional & Executive

Leasing, Inc. v. Commissioner, 89 T.C. 225, 232 (1987), affd. 862

F.2d 751 (9th Cir. 1988).   The relevant factors in determining

the characterization of an employment relationship include:

(1) The degree of control exercised by the principal over the

details of the work; (2) which party invests in the facilities
                               - 5 -

used in the work; (3) the opportunity of the hired party for

profit or loss; (4) whether the type of work is part of the

principal’s regular business; (5) the permanency of the

relationship between the parties to the relationship; (6) whether

the principal has the right to discharge the individual; (7)

whether the principal provides benefits to the hired party

typical of those provided to employees; and (8) the relationship

the parties believe they are creating.   See Nationwide Mut. Ins.

Co. v. Darden, supra at 322-324; Weber v. Commissioner, supra at

387; Professional & Executive Leasing, Inc. v. Commissioner,

supra at 232.   The factors are not necessarily weighed equally,

but according to their significance in the particular case.    See

Aymes v. Bonelli, 980 F.2d 857, 861 (2d Cir. 1992); Matt v.

Commissioner, T.C. Memo. 1990-209; see also sec. 31.3401(c)-1(d),

Employment Tax Regs.

     Ordinarily, the principal’s right to control the manner in

which the work is performed is the single most important factor

in determining whether there is an employer-employee

relationship.   See Leavell v. Commissioner, 104 T.C. 140, 149

(1995).   In this regard, petitioners point out that petitioner

was free to teach his classes and supervise his thesis and

special topic students as he deemed appropriate.   Petitioners

also point out that, other than the time spent teaching students

in the classroom, petitioner was required to spend very little
                                - 6 -

time on campus.    They contend that the universities exercised

very little control over petitioner’s teaching assignments.

Therefore, according to petitioners, petitioner’s relationship to

each university was as an independent contractor, not as an

employee.

       A similar argument was advanced by the taxpayer under

similar circumstances in Potter v. Commissioner, T.C. Memo. 1994-

356.    In that case the taxpayer was an untenured college

professor employed on a course-by-course basis.    The colleges and

the taxpayer entered into written contracts that specified the

courses to be taught, teaching hours, location of classes, and

compensation arrangements.    The taxpayer considered himself to be

an independent contractor and reported the income and related

expenses from his teaching activities on a Schedule C.    The

Commissioner determined that the taxpayer was an employee of the

colleges and, accordingly, treated the deductions claimed on the

Schedule C as employee business expenses.

       The Court agreed with the Commissioner and rejected the

taxpayer’s argument that the colleges did not exert sufficient

control over his teaching activities to render him an employee of

the colleges.    In so doing, we stated that “Where the inherent

nature of the job mandates an independent approach, a lesser

degree of control exercised by the principal may result in a

finding of an employer-employee status.”    Id. (citing Bilenas v.
                               - 7 -

Commissioner, T.C. Memo. 1983-661); see also Weber v.

Commissioner, supra at 390 (noting that where professional

individuals are involved, the control necessarily becomes more

tenuous than the control over nonprofessional employees).    We

concluded that the colleges maintained and exercised sufficient

control appropriate to the situation and that the level of

control was sufficient to render the taxpayer an employee of the

colleges.   Taking into account other common-law factors set forth

above, we concluded that the taxpayer was an employee of both

colleges.   See also Bilenas v. Commissioner, supra (finding that

an untenured, adjunct professor was an employee of a college

rather than an independent contractor in relation to his teaching

activities).

     As in Potter v. Commissioner, supra, we are satisfied in

this case that the universities had the authority to exercise,

and exercised, sufficient control over petitioner’s teaching

assignments to support a finding that petitioner was an employee

of the universities.   Our conclusion on this point is further

supported by the application of other of the common-law factors

relevant to such determinations.   Specifically, we note:

(1) The nature of petitioner’s services to the universities as an

adjunct professor is consistent with the regular business of each

university; (2) petitioner’s compensation for the teaching

assignments was set by contract--the risk of loss from under
                               - 8 -

enrollment, or profit from excess enrollment, rested with the

universities; (3) petitioner began his relationship with the

universities in 1991, and he has continued to teach various

courses related to his profession at both universities; and

(4) each written contract expressly provides that petitioner

would be treated as an employee.

     Accordingly, we find that petitioner was an employee of ISU

and UOI during 1997.   It follows that expenses related to his

teaching activities must be deducted as miscellaneous itemized

deductions.   See secs. 62(a)(1), 63(d), 67(a).    Respondent’s

determination in this regard is therefore sustained.

     Reviewed and adopted as the report of the Small Tax Case

Division.

     Based on the foregoing,

                                            Decision will be

                                       entered for respondent.
