In Uncategorized on 05/20/2013 at 18:08

And You Might Be An IC

That’s the story of Jonny Ramirez, radio personality and savior of station KXTN in San Antonio, TX. Judge Jacobs tells Jonny’s story in Juan A. Ramirez and Rebecca Ybarra-Ramirez, a “not-for-nuthin’”,  Section 7463, in 2013 T. C. Sum. Op. 38, filed 5/20/13.

Jonny, as Juan A. is known professionally, worked under contract to Univision, owners of KXTN, and toiled five hours per day, six days a week, at the mike, made personal appearances, and promoted KXTN, for a salary, benefits and stock options.

But it looked like the stock options, Jonny’s employment, and KXTN, were all about to go south, never to return, as Univision claimed the station was a loser.

Jonny, in his own words, “hit the bricks”, running from advertiser to advertiser, glad-handing, cajoling, charming and enticing, until he saved the station by hauling in a netful of new fish.

Judge Jacobs: “Mr. Ramirez established a direct, personal relationship with his sponsors, working hand-in-hand with them from the start of the advertising campaign to its end. They had no written contracts, just handshake agreements. Mr. Ramirez set the amount to be paid to him for his promotional services without input from Univision or KXTN. The amounts he received for these services varied from year to year depending on how hard he ‘hit the bricks’, i.e., the amount of effort Mr.Ramirez exerted in working with his sponsors.” 2013 T. C. Sum. Op. 38, at p. 4.

“Indeed, Univision’s and KXTN’s only involvement was to ensure that (1) the script did not contain fraudulent material, and (2) Mr. Ramirez did not use language that would jeopardize the radio station’s broadcasting license.” 2013 T. C. Memo. 38, at p. 5

Jonny got $82K for his troubles, but Univision treated him as an employee for everything, and gave him a W-2, as the IRS had “whanged their pates”, as the late Mike Berger put it, for treating other employees as ICs. Jonny’s CPA’s protests went nowhere.

Jonny’s work was outside the scope of his employment as an on-air personality. He worked with his sponsors, and his name and persona were what brought them in and kept them in the KXTN corral. True, KXTN monitored Jonny’s language and any larcenous tendencies on the part of his sponsors’ radio ads, but that’s not enough. Jonny had to maintain his good standing with KXTN to maintain his value to his sponsors, but that’s not enough either.

As for the classic test of “profit or loss from the activity”, Judge Jacobs buys Jonny’s testimony that what he makes depends upon how hard he “hits the bricks”. And Jonny hit ‘em hard.

IRS’ argument that advertising is an integral part of the radio broadcasting business fares no better. “Selling and broadcasting advertising is the manner by which a radio station earns a profit; it is an integral part (i.e., the so-called mother’s milk) of the station’s business. But Mr. Ramirez was not employed by Univision to sell on-air advertising; rather, he was employed to create on-air content (i.e., his radio program). Univision hired him to be a radio personality, not a salesperson.” 2013 T. C. Sum. Op. 38, at p. 16.

Jonny hit Tax Court as hard as he hit the bricks. And it pays off.

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