                   T.C. Summary Opinion 2009-162



                      UNITED STATES TAX COURT



                  ANGELA LEE SLOAN, Petitioner v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 3529-08S.               Filed October 19, 2009.



     Angela Lee Sloan, pro se.

     Mark H. Pfeffer, for respondent.



     DEAN, 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.   Pursuant to section 7463(b),

the decision to be entered is not reviewable by any other court,

and this opinion shall not be treated as precedent for any other

case.   Unless otherwise indicated, subsequent section references

are to the Internal Revenue Code in effect for the year in issue,
                                - 2 -

and all Rule references are to the Tax Court Rules of Practice

and Procedure.

     For 2004 respondent determined a deficiency of $2,089 in

petitioner’s Federal income tax.    The issues for decision1 are:

(1) Whether respondent properly disallowed petitioner’s claimed

business expenses as a “musician, vocalist, and actress”

(musician business) and as a “services musician vocalist” (band

business); (2) whether respondent properly disallowed

petitioner’s claimed deduction for the business use of her home;

and (3) whether petitioner is a statutory employee pursuant to

section 3121(d)(3)(D).

                              Background

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

The stipulation of facts and the exhibits received into evidence

are incorporated herein by reference.      When petitioner filed her

petition, she resided in California.

     In October 2005 petitioner timely filed a Form 1040, U.S.

Individual Income Tax Return, for 2004.     On one Schedule C,

Profit or Loss From Business, she reported expenses of $8,1762

from her musician business.    On a second Schedule C she reported




     1
      Petitioner conceded that she failed to report $735 in wage
income.
     2
      This Schedule C included deductions for expenses of:
(1) $1,877 for depreciation and sec. 179 expenses; (2) $1,538 for
other expenses; and (3) $4,761 for the business use of her home.
                               - 3 -

expenses of $2,9653 from her band business.   She did not report

income from either her musician business or her band business.

     On Schedule A, Itemized Deductions, petitioner reported

business expenses associated with her sales position for Clear

Channel Communications (Clear Channel).   She now contends that

she is a statutory employee and is entitled to deduct those

expenses on Schedule C.

     On November 6, 2007, respondent issued petitioner a notice

of deficiency disallowing the deductions claimed on her Schedules

C.

     Petitioner has worked as a sales representative4

(representative) for Clear Channel since 2001.   As a

representative, petitioner spends over 50 percent of her time

outside of the office selling and marketing on-air media time5 to

prospective clients.   She uses her personal cell phone and

vehicle to solicit and serve clients and she occasionally




     3
      This Schedule C included deductions for expenses of:
(1) $240 for repairs and maintenance; (2) $373 for supplies; and
(3) $2,352 for other expenses.
     4
      Although it is unclear whether petitioner is an account
executive or a sales representative, her job title has no bearing
on the decision of the Court.
     5
      On-air media advertising consists of radio, Internet, and
other nontraditional advertising.
                               - 4 -

purchases gifts and meals for her clients, expenses for which

Clear Channel does not reimburse her.6

     Clear Channel provides petitioner with a work space

furnished with a desk, a computer, and a phone and hires

personnel to assist petitioner.   Clear Channel also provides

health and dental insurance and contributes to petitioner’s

section 401(k) retirement plan.   Although petitioner is required

to recruit her own clients, Clear Channel occasionally provides

representatives with customer leads and existing client accounts.

                             Discussion

I.   Burden of Proof

      Generally, the Commissioner’s determinations in a notice of

deficiency are presumed correct, and the taxpayer has the burden

of proving that those determinations are erroneous.   See Rule

142(a); Welch v. Helvering, 290 U.S. 111, 115 (1933).   In certain

circumstances, however, section 7491(a)(1) places the burden of

proof on the Commissioner.   Petitioner has not alleged that

section 7491 is applicable, nor has she established compliance

with the requirements of section 7491(a)(2)(A).   Therefore, the

burden of proof does not shift to respondent.




      6
      Clear Channel’s general policy in 2004 was not to reimburse
employees for expenses.
                                  - 5 -

II.   Claimed Business Expense Deductions

      Deductions are strictly a matter of legislative grace, and

taxpayers must satisfy the specific requirements for any

deduction claimed.    See INDOPCO, Inc. v. Commissioner, 503 U.S.

79, 84 (1992); New Colonial Ice Co. v. Helvering, 292 U.S. 435,

440 (1934).    Taxpayers bear the burden of substantiating the

amount and purpose of any claimed deduction.    See Hradesky v.

Commissioner, 65 T.C. 87 (1975), affd. per curiam 540 F.2d 821

(5th Cir. 1976).

      A.   Business Use of Home

      As a general rule, section 280A(a) denies deductions with

respect to the use of a dwelling unit that was used by the

taxpayer as a residence during the taxable year.    But section

280A(c)(1)(A) permits the deduction of expenses allocable to a

portion of the dwelling unit that was used exclusively and

regularly as the principal place of business for the taxpayer’s

trade or business.

      Section 280A(c)(5) limits the allowable deduction of

expenses related to the trade or business use of a residence to

the excess of the gross income derived from the trade or business

use for the year over the sum of certain deductions allocable to

such income.

      Petitioner claimed a deduction for the business use of her

home on the Schedule C for her musician business.    Pursuant to
                                 - 6 -

section 280A(c)(5), she is entitled to deduct expenses from the

business use of her home only to the extent the income from her

musician business exceeds allowable deductions.      Petitioner did

not report any income from her business or otherwise demonstrate

probable receipt of income.     She therefore is not entitled to

deduct expenses for the business use of her home for 2004, and

the Court sustains respondent’s disallowance.

     B.   Schedule C Expenses

     Section 162(a) allows a deduction for all ordinary and

necessary expenses paid or incurred by a taxpayer in carrying on

any trade or business.   An expense is considered ordinary if

commonly or frequently incurred in the trade or business of the

taxpayer.   Deputy v. du Pont, 308 U.S. 488, 495-496 (1940).       An

expense is necessary if it is appropriate or helpful in carrying

on a taxpayer’s trade or business.       Commissioner v. Heininger,

320 U.S. 467, 471 (1943); Welch v. Helvering, supra at 113.

     A taxpayer must maintain records sufficient to substantiate

the amounts of the deductions claimed.      Sec. 1.6001-1(a), Income

Tax Regs.   If a taxpayer establishes that an expense is

deductible but is unable to substantiate the precise amount, we

may estimate the amount, bearing heavily against the taxpayer

whose inexactitude is of his own making.      Cohan v. Commissioner,

39 F.2d 540, 543-544 (2d Cir. 1930).      The taxpayer must present

sufficient evidence for the Court to form an estimate because
                                - 7 -

without such a basis, any allowance would amount to unguided

largesse.    Williams v. United States, 245 F.2d 559, 560-561 (5th

Cir. 1957); Vanicek v. Commissioner, 85 T.C. 731, 742-743 (1985).

       Petitioner asserts that she engaged in her band and musician

businesses for profit.    But respondent’s dispute concerns whether

petitioner has substantiated her claimed business expenses, not

whether she engaged in these activities for profit.     Thus, the

Court need address only whether petitioner substantiated her

business expenses.

       Petitioner did not testify as to her claimed business

expenses and failed to present any credible evidence to

substantiate expenses for either her musician or her band

business.    She also did not provide the Court with sufficient

evidence to permit an estimate of the expenses.    Respondent’s

determination is sustained.

III.    Petitioner’s Employment Status

       Adjusted gross income generally consists of gross income

less trade or business expenses, except in the case of the

performance of services by an employee.    Sec. 62.   With

exceptions not relevant here, an individual performing services

as an employee may deduct expenses incurred in the performance of

services as an employee only as miscellaneous itemized deductions

on Schedule A and then only to the extent such expenses exceed 2
                               - 8 -

percent of the individual’s adjusted gross income.   Secs. 63(a),

(d), 67(a) and (b).

     Petitioner claims that she is not an employee and relies on

sections 3508(b)(2) and 3121(d)(3).

     A.   Petitioner’s Employment Status Under Section 3508(b)(2)

     Section 3508 affords nonemployee status to certain

statutorily defined classes of activities, including those of a

direct seller.   A “direct seller” is a person engaged in the

trade or business of either selling consumer products in the home

as opposed to a permanent retail establishment or delivering or

distributing newspapers or shopping news.   Sec. 3508(b)(2)(A).

Section 3508(b)(2)(B) also requires that the person receive

remuneration related to sales rather than to the number of hours

worked.   Finally, section 3508(b)(2)(C) requires that the person

perform services pursuant to a written contract that provides

that the person is not treated as an employee with respect to

those services for Federal tax purposes.

     Although substantially all the remuneration petitioner

received is directly related to sales rather than to the number

of hours worked, she does not satisfy the requirements of section

3508(b)(2)(A) or (C).   Petitioner does not sell consumer products

or deliver newspapers, and she did not provide evidence of a

contractual agreement with Clear Channel indicating that she

would not be treated as an employee for Federal tax purposes.
                                  - 9 -

Accordingly, she is not entitled to report deductions on Schedule

C under section 3508(b)(2).

     B.   Petitioner’s Employment Status Under Section 3121(d)(3)

     An individual who is a statutory employee under section

3121(d)(3) is not an employee for purposes of sections 62 and 67

and is not subject to the section 67(a) 2-percent limitation for

expenses incurred by such employee in the performance of services

as an employee.     Ewens & Miller, Inc. v. Commissioner, 117 T.C.

263 (2001); Prouty v. Commissioner, T.C. Memo. 2002-175.

     An employee for employment tax purposes is defined by

section 3121(d) as follows:

          SEC. 3121(d). Employee.--For purposes of this
     chapter, the term “employee” means–

                  (1) any officer of a corporation; or

               (2) any individual who, under the usual
          common law rules applicable in determining the
          employer-employee relationship, has the status of
          an employee; or

                (3) any individual (other than an individual
          who is an employee under paragraph (1) or (2)) who
          performs services for remuneration for any person
          * * *

                    *    *    *    *      *   *   *

                       (D) as a traveling or city salesman,
                  other than as an agent-driver or commission-
                  driver, engaged upon a full-time basis in the
                  solicitation on behalf of, and the
                  transmission to, his principal (except for
                  side-line sales activities on behalf of some
                  other person) of orders from wholesalers,
                  retailers, contractors, or operators of
                  hotels, restaurants, or other similar
                                - 10 -

               establishments for merchandise for resale or
               supplies for use in their business
               operations;

          if the contract of service contemplates that
          substantially all of such services are to be performed
          personally by such individual; except that an
          individual shall not be included in the term
          “employee” under the provisions of this paragraph if
          such individual has a substantial investment in
          facilities used in connection with the performance of
          such services (other than in facilities for
          transportation)* * *

     Petitioner asserts that she meets the statutory exception

under section 3121(d)(3)(D).7    Respondent alleges that

petitioner’s working relationship with Clear Channel is that of

a common law employee and that the character of the product

petitioner sells and the character of her customers do not meet

the exception described in section 3121(d)(3)(D).

     Section 3121(d)(3)(D) defines a salesperson as engaged in

the sale of “merchandise for resale” or in the sale of “supplies

for use in their business operations”.    Petitioner does not sell

“merchandise”; rather, petitioner sells advertising “time”.

Furthermore, her clients purchase air time not for resale or for

use as a supply in their business operations but to advertise

their products and services.    Additionally, on Schedules C

businesses deduct advertising expenses separately from goods and




     7
      Petitioner does not allege that she is a statutory employee
under sec. 3121(d)(3)(A), (B), or (C).
                              - 11 -

supply expenses, providing further evidence that air time is not

“merchandise” as contemplated under section 3121(d)(3)(D).

     Petitioner’s employment does not fall within the definition

of a traveling or city salesperson under section 3121(d)(3)(D),

and the evidence shows that she is a common law employee under

section 3121(d)(2).

     Whether an individual is a common law employee under

section 3121(d)(2) is a question of fact.   Profl. & Executive

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

862 F.2d 751 (9th Cir. 1988); Simpson v. Commissioner, 64 T.C.

974, 984 (1975).   Among the relevant factors in determining the

substance of an employment relationship are the following:

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

details of the work; (2) the taxpayer’s investment in

facilities; (3) the taxpayer’s opportunity for profit or loss;

(4) permanency of the relationship between the parties; (5) the

principal’s right of discharge; (6) whether the work performed

is an integral part of the principal’s business; (7) what

relationship the parties believe they are creating; and (8) the

provision of employee benefits.   NLRB v. United Ins. Co., 390

U.S. 254, 258 (1968); Garrett v. Phillips Mills, Inc., 721 F.2d

979, 981 (4th Cir. 1983); Simpson v. Commissioner, supra at 984-

985; sec. 31.3121(d)-1(c)(2), Employment Tax Regs. (setting

forth criteria for identifying common law employees).   No one
                               - 12 -

factor is determinative.    Cmty. for Creative Non-Violence v.

Reid, 490 U.S. 730, 752 (1989).   Instead, all the incidents of

the relationship must be assessed and weighted.      NLRB v. United

Ins. Co., supra at 258; Simpson v. Commissioner, supra at 985.

The factors should not be weighted equally but should be

weighted according to their significance in the particular case.

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

Commissioner, T.C. Memo. 1990-209.

     The control factor is the “crucial test” to determine the

nature of a working relationship.    Weber v. Commissioner, 103

T.C. 378, 387 (1994), affd. per curiam 60 F.3d 1104 (4th Cir.

1995).   Both the control exercised by the alleged employer and

the degree to which the alleged employer may intervene to impose

control must be examined.    Id. at 387-388.    To retain the

requisite control over the details of an individual’s work, the

employer need not stand over the individual and direct every

move; it is sufficient that the employer has the right to do so.

Id. at 388; Thomas Kiddie, M.D., Inc. v. Commissioner, 69 T.C.

1055, 1058 (1978).

     Although petitioner is solely responsible for soliciting

clients and collecting commissions, Clear Channel establishes

her duties, sets performance goals, and provides sales training

consistent with Clear Channel procedures.      Petitioner also has a

manager who oversees and supervises her performance.     If her
                                - 13 -

performance is unsatisfactory, Clear Channel may terminate her

employment.   Petitioner is also required to submit reports of

her client accounts for evaluation, submit a weekly timecard

reflecting hours worked, and request permission for time off.

     The foregoing facts indicate that petitioner works under

the direction and control of Clear Channel.

     Additionally, although petitioner is compensated solely on

commission, she does not purchase or own the air time she sells,

making her risk of loss negligible at best.

     It is apparent that Clear Channel considers petitioner a

common law employee.   Clear Channel withholds Federal income

taxes, FICA taxes, and Medicare taxes and does not issue

petitioner a Form 1099.8   The withholding of taxes is consistent

with a finding that petitioner is a common law employee.   See

Packard v. Commissioner, 63 T.C. 621, 632 (1975).

     Petitioner also receives health and dental insurance,

participates in a section 401(k) retirement plan, and accrues

sick leave and vacation time.

     Lastly, the record reflects that petitioner has little or

no investment in facilities or equipment beyond the use of her

personal computer, cell phone, and vehicle.   Clear Channel




     8
      Petitioner’s Form W-2, Wage and Tax Statement, for 2004 was
not attached to her 2004 Federal income tax return.
                              - 14 -

provides a work space, furnished with a desk, a computer, and a

phone and hires personnel to assist petitioner.

     None of the relevant factors discussed above support

petitioner’s position.   Considering the record and all the facts

and circumstances, the Court concludes that petitioner is a

common law employee under section 3121(d)(2) and is not a

statutory employee under section 3121(d)(3).

     Other arguments made by the parties and not discussed

herein were considered and rejected as irrelevant, without

merit, or moot.

     To reflect the foregoing,


                                           Decision will be entered

                                       for respondent.
