                     T.C. Summary Opinion 2009-76



                        UNITED STATES TAX COURT



                   THOMAS R. TAVELLA, Petitioner v.
             COMMISSIONER OF INTERNAL REVENUE, Respondent



        Docket No. 11463-07S.             Filed May 14, 2009.


        Thomas R. Tavella, pro se.

        Alexander D. Devitis, 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 as amended, and all Rule

references are to the Tax Court Rules of Practice and Procedure.
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     Respondent determined a deficiency in petitioner’s Federal

income tax of $9,922 for 2004.    The issue for decision is whether

petitioner is subject to self-employment tax.

                            Background

     Some of the facts and one of the issues has been stipulated.

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

facts and the exhibits received in evidence are incorporated

herein by reference.   At the time the petition was filed,

petitioner resided in California.

     During 2004 petitioner worked as a “consultant” and

independent contractor for the sole proprietorship of Mark H.

Randall (Mr. Randall), who was doing business as “The Mark

Randall Company” (Mark Randall).    Petitioner entered into an oral

contract “sealed with a handshake” with Mr. Randall to “work

together and build his business and make it successful.”

Petitioner has worked exclusively for Mark Randall since 1994.

Petitioner described his work with Mark Randall as

“collaborative”, but petitioner does not handle any account

completely on his own.

     Petitioner used the title “President” of Mark Randall

because it conveyed to clients his importance to the business of

Mark Randall.   Petitioner, however, maintained no ownership

interest in and had no executive responsibility for Mark Randall.

As Mark Randall had no offices, petitioner maintained a home
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office for his work.   Any travel required for petitioner’s work

was usually on weekends; he usually called on his clients on

Sunday.

     Typically, petitioner consulted with synagogues in

fundraising matters.   He conducted interviews from his home with

members of the client congregations to determine their feelings

about their synagogue and whether they would be willing to

increase their donations.   Petitioner might also conduct meetings

with volunteer congregants to help them solicit funds.    Mark

Randall paid petitioner a fixed rate per month per client until

either the contract between Mark Randall and the client ended or

the fee to the client was reduced.

     Petitioner included a Schedule C, Profit or Loss From

Business, with his Federal income tax return for 2004, stating

his business or profession as consultant.    Petitioner, however,

did not report any self-employment tax.   Respondent examined

petitioner’s return and determined that petitioner owes self-

employment tax on his income from Mark Randall.   As a result of

the adjustment to self-employment tax respondent made other

computational adjustments that will be resolved by the Court’s

decision on the self-employment tax issue.

                            Discussion

     Generally, the Commissioner’s determinations in a notice of

deficiency are presumed correct, and the taxpayer has the burden
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of proving that those determinations are erroneous.    See Rule

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

cases the burden of proof with respect to relevant factual issues

may shift to the Commissioner under section 7491(a).     Because

there is no dispute as to any factual issue in this case, section

7491(a) is inapplicable.

“Statutory Employee”

     Petitioner argues that he is a so-called statutory employee

and therefore is not subject to self-employment taxes.

Generally, the tax on self-employment income applies to the “net

earnings from self-employment” of an individual.   Secs. 1401,

1402(b).   In simplified terms, net earnings from self employment

means the “gross income derived by an individual from any trade

or business carried on by such individual,” less the deductions

attributable to the trade or business.   Sec. 1402(a).    The term

“trade or business” generally does not include the performance of

services by an individual as an employee.   Sec. 1402(c)(2).    The

term “employee” for employment tax purposes has the same meaning

as in section 3121(d).   Sec. 1402(d).

     An employee for employment tax purposes is defined in

pertinent part 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
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                (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
           * * *

as an agent or commission driver who distributes certain food

products, as a life insurance salesman, as a home worker working

on certain materials or goods, or as a traveling or city

salesman, who is not an agent or commission driver, who meets

certain other requirements.   The listed individuals, if the

contract of service contemplates that substantially all of such

services are to be performed personally by such individual, will

be classified as employees except that an individual will not be

included in the term “employee” if he has a substantial

investment in facilities used in connection with the performance

of the services (other than in facilities for transportation).

Sec. 3121(d).

     The Social Security Act Amendments of 1950 “restyled the

predecessor” of section 3121(d) and extended coverage to

specified classes of workers “irrespective of their common-law

status.”   See United States v. W.M. Webb, Inc., 397 U.S. 179,

186 n. 12 (1970).   According to S. Rept. 1669, 81st Cong., 2d

Sess. (1950), 1950-2 C.B. 302, 346-347, the definition of

“employee” was to be expanded to include individuals performing
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“certain categories of service which are subject to clear-cut

definition,” and if “the services are not performed in one of the

designated occupational groups,” the paragraph is inapplicable

with respect to such services.

     Petitioner takes the position that his work was similar to

that of life insurance agents and that he competed with them for

clients.   According to petitioner:      “it is reasonable to assume

that the list of jobs was meant to be examples of and not a

finite list to the exclusion of all others who may work in the

same manner.”   Section 3121(d), however, does not provide that

the term “employee” includes the occupations on the list.       It

defines the term “employee” and lists discrete and specific

categories of service that are not so ambiguous as to allow

petitioner in his service profession, to fit the definition of

“statutory employee” as prescribed by that section.       The

legislative history clearly states the intention of Congress to

exclude from the definition of “employee” individuals performing

services that “are not performed in one of the designated

occupational groups”.

     If the statute does not include him, petitioner counters by

arguing that since he competes with life insurance salesmen,

allowing them to be classified as statutory employees while

denying him the same classification is unfair and violates his

right of equal protection.
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     Under equal protection analysis, a classification in a

Federal statute is subject to strict scrutiny only if it

“impermissibly interferes with the exercise of a fundamental

right or operates to the peculiar disadvantage of a suspect

class.”   Mass. Bd. of Ret. v. Murgia, 427 U.S. 307, 312 (1976);

San Antonio Indep. Sch. Dist. v. Rodriguez, 411 U.S. 1, 16-17

(1973).   Neither of these circumstances applies here.

Consequently, the rational basis standard is the appropriate one

to apply.   Under the standard, where a rational basis exists for

divergent treatment of different classes of persons under a tax

statute, the statute is not in violation of the Fifth Amendment

because of the divergent treatment.    Regan v. Taxation With

Representation, 461 U.S. 540 (1983); United States v. Maryland

Savings-Share Ins. Corp., 400 U.S. 4 (1970).   Generally, under

this standard, a differentiation in treatment is not violative of

equal protection principles if any state of facts rationally

justifying it is demonstrated to or perceived by the courts.

United States v. Maryland Savings-Share Ins. Corp., supra at 6.

The Supreme Court has stated that “the presumption of

constitutionality can be overcome only by the most explicit

demonstration that a classification is a hostile and oppressive

discrimination against particular persons and classes.   The

burden is on the one attacking the legislative arrangement to

negative every conceivable basis which might support it.”       Madden
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v. Commonwealth of Kentucky, 309 U.S. 83, 88 (1940).       The

presumption of the existence of a rational basis for a

classification in a revenue statute is particularly strong.

Black v. Commissioner, 69 T.C. 505, 507-508 (1977); Nammack v.

Commissioner, 56 T.C. 1379, 1385 (1971), affd. per curiam 459

F.2d 1045 (2d Cir. 1972).

     The Supreme Court, in United States v. W.M. Webb, Inc.,

supra at 186, suggests that Congress intended by the statutory

revision to limit those occupations that might be considered to

be filled by employees.

     Petitioner has not shown that Congress did not rationally

decide to include individuals in specific service professions in

the category of “employee” regardless of the common law rules for

determining the employer-employee relationship and to exclude

others.   The Court finds that the legislative classification is

constitutional.

     Petitioner, therefore, cannot be a “statutory” employee

under section 3121(d)(3).   It follows that petitioner had income

from self-employment and is liable for self-employment tax for

2004.   See secs. 1401 and 1402.

     To reflect the foregoing,


                                              Decision will be entered

                                         for respondent.
