                        T.C. Memo. 1997-217



                      UNITED STATES TAX COURT



           CHANDER AND ASHIMA K. KANT, Petitioners v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 11188-95.               Filed May 8, 1997.



     Chander Kant, pro se.

     Craig Connell, for respondent.



             MEMORANDUM FINDINGS OF FACT AND OPINION



     PANUTHOS, Chief Special Trial Judge:     This case was heard

pursuant to the provisions of section 7443A(b)(3) and Rules 180,

181, and 182.1   Respondent determined a deficiency in


     1
        All section references are to the Internal Revenue Code
as amended, unless otherwise indicated. All Rule references are
to the Tax Court Rules of Practice and Procedure.
                               - 2 -

petitioners' 1993 Federal income tax in the amount of $4,877 and

an accuracy-related penalty under section 6662(a) in the amount

of $975.2   After a concession by respondent,3 the issue for

decision is whether, for the purposes of the alternative minimum

tax, petitioner Chander Kant (petitioner) was an employee with

respect to items of income and expense related to his activities

in Singapore.

                          FINDINGS OF FACT

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

The stipulation of facts and attached exhibits are incorporated

herein by this reference.   Petitioners resided in Short Hills,

New Jersey, at the time that the petition was filed.

     Petitioner is an associate professor of economics at Seton

Hall University (Seton Hall), and petitioner Ashima K. Kant (Ms.

Kant) is an associate professor of nutrition at Queens College,

City University of New York.   In June 1993, Seton Hall granted

petitioner's request for sabbatical leave.   In his application,

petitioner maintained that a sabbatical leave would "result in at

least two papers publishable in respectable journals, and will

     2
        Respondent claimed an increased deficiency in her answer
to petition in the amount of $960 (for a total deficiency of
$5,837), asserting that petitioners were not entitled to a
claimed child care credit. The parties agree that petitioners'
entitlement to the claimed child care credit is contingent upon
our determination of the other issues. Therefore, we do not
separately address this issue.
     3
        Respondent concedes that petitioners are not liable for
the accuracy-related penalty under sec. 6662(a).
                                 - 3 -

strengthen the * * * University's visibility."    Seton Hall's

faculty guide provided:   "The major purpose of a sabbatical leave

is to provide the opportunity for continued professional growth

and new or renewed intellectual achievement through study,

research, scholarly writing, or professionally related travel."

The faculty guide further provided that faculty members on

sabbatical leave must obtain written approval of the provost

before accepting paid employment.

     In support of his sabbatical leave in 1993, petitioner

accepted an appointment as a "Senior Fellow" at the National

University of Singapore (NUS).    Ms. Kant was on leave without pay

during that period.   Petitioners resided in Singapore for

approximately 5 months during the 1993 taxable year.    While in

Singapore, petitioner engaged in research and prepared a seminar

paper which was presented to the Department of Economics at NUS.

NUS provided petitioner with an office and library access, as

well as housing and child care benefits.    The record does not

contain any detailed documentation concerning the precise nature

of petitioner's relationship with NUS.4    Furthermore, the record

does not indicate whether petitioner received written approval

from Seton Hall before accepting the appointment at NUS.

     Petitioner received $27,191 from NUS during the 1993 taxable

year.    The Inland Revenue Authority of Singapore treated

     4
        Petitioners maintain that some of their documentation was
destroyed by rain.
                                - 4 -

petitioner as an employee of NUS, and required NUS to withhold a

portion of the amounts payable to petitioner.    Upon leaving

Singapore, petitioner was required to complete a form relating to

an employee's cessation of employment.

     On their U.S. Federal income tax return for the taxable year

1993, petitioners reported the amounts received from NUS as wages

or salary, and claimed the expenses related to the stay in

Singapore on Schedule A as unreimbursed employee business

expenses.   Respondent's notice of deficiency recomputed

petitioners' tax liability under the alternative minimum tax.

Respondent determined that, for the purpose of computing the

alternative minimum tax, petitioner's unreimbursed employee

business expenses could not be deducted.    See Johnson v.

Commissioner, T.C. Memo. 1993-530.

     After receiving the notice of deficiency, petitioners

submitted an amended 1993 return which reported items of income

and expense related to petitioner's activity in Singapore on

Schedule C, rather than on Schedule A.    To support this position,

petitioners argue that petitioner was not an employee with

respect to his activities at NUS.    Petitioners concede that if

the Court should determine that petitioner was an employee,

respondent's determination in the notice of deficiency is

correct.    Respondent concedes that if the Court should determine

that petitioner was not an employee with respect to his

activities at NUS, petitioners may deduct the expenses in
                               - 5 -

question for the purposes of computing their alternative minimum

tax liability.

     At trial, petitioners also argued that the amount received

from NUS was a fellowship.   Petitioners suggest that since the

amounts were received pursuant to a fellowship, the "receipts are

not called wages, and are not subject to the Federal Insurance

Contributions Act (FICA), the Federal Unemployment Tax Act

(FUTA), and the Collection of Income Tax at Source on Wages."

Petitioners conclude that the amount received from NUS was

properly reportable as self-employment income, and, therefore,

petitioner was not an employee of NUS.

                             OPINION

     We begin by noting that respondent's determinations are

presumed correct, and petitioners bear the burden of proving that

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

Helvering, 290 U.S. 111, 115 (1933).    Moreover, deductions are a

matter of legislative grace, and petitioner bears the burden of

proving that he is entitled to any deductions claimed.     INDOPCO,

Inc. v. Commissioner, 503 U.S. 79, 84 (1992).

     Work-related expenses incurred by an independent contractor

are deductible "above the line" under section 62(a)(1), whereas

unreimbursed expenses incurred by an employee are deductible

"below the line" as itemized deductions.     Hathaway v.

Commissioner, T.C. Memo. 1996-389.     Section 56(b)(1)(A)(i)

provides that, for the purposes of calculating a taxpayer's
                               - 6 -

alternative minimum taxable income, no deductions shall be

allowed for miscellaneous itemized deductions.

     The Internal Revenue Code does not define the term

“employee”.   Whether the employer-employee relationship exists is

a factual question.   Weber v. Commissioner, 103 T.C. 378, 386

(1994), affd. 60 F.3d 1104 (4th Cir. 1995).   Among the relevant

factors in determining the nature of an employment relationship

are the following: (1) The degree of control exercised by the

principal over the details of the work; (2) which party invests

in the facilities used in the work; (3) the taxpayer's

opportunity for profit or loss; (4) the permanency of the

relationship between the parties to the relationship; (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 benefits typical of those provided to employees.

NLRB v. United Ins. Co. of Am., 390 U.S. 254, 258-259 (1968);

Weber v. Commissioner, supra at 387; Professional & Executive

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

F.2d 751 (9th Cir. 1988).   No single factor is determinative;

rather, all the incidents of the relationship must be weighed and

assessed.   NLRB v. United Ins. Co. of Am., supra at 258; Weber v.

Commissioner, supra at 387.   The most important factor in

determining whether a common law employment relationship exists,

however, is the right to control the manner in which the
                                 - 7 -

taxpayer's work is performed.     Weber v. Commissioner, supra at

387.    We must consider not only the actual control exercised by

the principal, but also the principal's right of control.     Id. at

387-388; Professional & Executive Leasing, Inc. v. Commissioner,

supra at 233-234.

       In order for a principal to retain the requisite control

over the details of a taxpayer's work, the principal need not

stand over the taxpayer and direct every move made by that

person.    Weber v. Commissioner, supra at 388; Professional &

Executive Leasing, Inc. v. Commissioner, supra at 234.     Moreover,

the exact amount of control required to find an employer-employee

relationship varies with different occupations.     United States v.

W.M. Webb, Inc., 397 U.S. 179, 192-193 (1970).     With respect to

individuals providing professional services, there is a lower

threshold level of control for the purposes of determining the

existence of employee status.     Weber v. Commissioner, supra at

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

supra at 234.    In this regard, we have stated:   "[T]he control of

an employer over the manner in which professional employees shall

conduct the duties of their positions must necessarily be more

tenuous and general than the control over nonprofessional

employees."     James v. Commissioner, 25 T.C. 1296, 1301 (1956).

       Petitioners contend that petitioner was not an employee with

respect to his activities at NUS.    In so doing, petitioners argue

that NUS and Seton Hall imposed little control over his
                               - 8 -

sabbatical activities, and that the benefits received by either

NUS or Seton Hall from petitioner's sabbatical activities were

attenuated and incidental.5   On the other hand, respondent argues

that petitioners have failed to produce adequate documentation to

establish that petitioner was anything other than an employee

with respect to his activities at NUS.

     Petitioners have failed to present sufficient evidence

concerning petitioner's relationship with NUS.    Although there is

some evidence relating to the activities performed during the

sabbatical itself, we are particularly troubled by the absence of

documentation pertaining to petitioner's agreement with NUS.     The

omitted documents are those which would assist in defining the

nature of the relationship between petitioner and NUS.     For

example, one missing document mentioned by petitioner at trial

was the actual letter from NUS to petitioner, appointing him as a

"Senior Fellow".   The available documentary evidence, including

forms from the Inland Revenue Authority of Singapore, indicates

that NUS treated petitioner as an employee.   Therefore,

petitioner has failed to meet his burden of proving that he was

anything other than an employee.   Rule 142(a).



     5
        Since the payments in question were made directly to
petitioner by NUS, and there is nothing in this record indicating
that Seton Hall had some financial arrangement with NUS or
otherwise directed petitioner's activities at NUS, we look only
to the relationship between petitioner and NUS to determine if he
was an employee.
                                - 9 -

     We now address petitioners' argument that the amounts paid

to petitioner by NUS were provided pursuant to a fellowship

arrangement.   Petitioners' argument in this regard, as we

understand it, is that amounts received pursuant to fellowships

are not considered wages under the Internal Revenue Code, and,

therefore, petitioner was not an employee of NUS.

     Petitioners do not cite any case law or statute to support

this position.   We believe, however, that petitioners have in

mind the provisions of section 117.     Section 117(a) excludes from

gross income "any amount received as a qualified scholarship by

an individual who is a candidate for a degree at an educational

organization described in section 170(b)(1)(A)(ii)".    The term

"qualified scholarship" refers to "any amount received by an

individual as a scholarship or fellowship grant to the extent the

individual establishes that, in accordance with the conditions of

the grant, such amount was used for qualified tuition and related

expenses".   Sec. 117(b)(1).   Furthermore, to qualify for the

exclusion, the payments cannot be conditioned upon the

recipient's providing of services, such as teaching or research.

Sec. 117(c).

     In this instance, petitioner has offered no proof that he

was a degree candidate at NUS or that he used any portion of the

proceeds for qualified tuition.    Additionally, as more fully

discussed above, petitioner has failed to establish that he was

not required to perform teaching, research, or other activities
                             - 10 -

as a condition for receiving payments as an employee from NUS.

Cf. Spiegelman v. Commissioner, 102 T.C. 394, 406 (1994)

(concluding that recipient of taxable research fellowship was not

liable for self-employment tax).

     Therefore, we conclude that the $27,191 received from NUS

was properly reportable as wage income.   Furthermore, as a result

of this conclusion, respondent's claim for an increased

deficiency (relating to the disallowed child care credit) is

sustained.

     To reflect the foregoing,

                                          Decision will be entered

                                   for respondent as to the

                                   deficiency and for petitioners

                                   as to the accuracy-related

                                   penalty.
