In Uncategorized on 02/08/2016 at 23:57

In my early, youthful days On The Hill Far Above, I found myself in the bewildering forest of hornbooks and cans. A hornbook was a simplified treatise on a branch of law, with basic principles set forth in bold-faced type (“black-letter law”). Probably the original was a primitive form of schoolbook, made from a scrap of paper affixed to a backing of cowhorn, whereon the schoolboy (those were the bad old days, ladies) read or scrawled his first letters.

A can was a digest of principal cases, again simplified and with the principles expounded in simple terms. The term, I suppose, derived from canned food or drink, preserved and ready to eat or drink with little or no preparation.

Nowadays the word-processor is our cannery. And a well-stocked one is well worth the effort of assembling.

Today Judge Vasquez gives us a few lines to add to those on our shelves, a discussion on avoiding the 20% negligence chop via a good-faith mistake. It’s the old EE vs IC scrum, and the case is Alfred S. Co, 2106 T. C. Memo. 19, filed 2/8/16. And the reason I’m burning the midnight oil is that I was closing a deal this afternoon; I have to earn a living, y’know.

Alf was a mechanical engineer in the employ of the US State Dep’t, Office of Overseas Building Operations. Judge Vasquez expatiates: “OBO is responsible for constructing buildings abroad and maintaining the security of U.S. facilities abroad. “ 2016 T. C. Memo 19, at p. 2, footnote 3. And Alf apparently was nowhere near Benghazi; this is a non-political blog. Anyway, Alf’s attempt to claim foreign earned income exclusion founders on the usual employed-by-the-US-government shoal. It’s all facts and circumstances, and you can read that part yourself. Nothing novel there.

But Alf avoids the 20% chop, courtesy of a very well-known law firm sometimes referred to as The Jersey Boys. And I offer Judge Vasquez’s discussion, with citations, so you can drag and drop into your next memorandum of law, when IC faces off with EE and you need the judge to cut you some slack.

“Although we ultimately disagree with petitioner, we find that it was reasonable under the circumstances for him to believe in good faith that he was not an employee of OBO. Petitioner does not have an accounting, finance, or tax background. Given the high level of difficulty in applying the common law employee test, it is reasonable for someone of petitioner’s level of education and experience to operate under the belief that he was not an employee of OBO. See, e.g., Levine v. Commissioner, T.C. Memo. 2005-86 (recognizing that application of the common law employee test often results in close cases where courts analyzing similar working arrangements can reach different conclusions). The worker classification analysis is generally fact intensive and often poses a close question of fact. For instance, there are cases involving personal service contractors where this Court determined that the taxpayers were employees, see, e.g., Eren v. Commissioner, T.C. Memo. 1995-555, aff’d, 180 F.3d 594 (4th Cir. 1999); Marckwardt v. Commissioner, T.C. Memo. 1991-347; Juliard v. Commissioner, T.C. Memo. 1991-230; Matt v. Commissioner, T.C. Memo. 1990- 209, and others where the Court determined that personal service contractors were independent contractors, see, e.g., Chin v. United States, 57 F.3d 722 (9th Cir. 1995); Levine v. Commissioner, T.C. Memo. 2005-86; DeTorres v. Commissioner, T.C. Memo. 1993-161. Each case, like this one, involved the same analysis–the common law employment test was applied to the facts and circumstances, and the outcome in each case involved the specific facts and circumstances related to the taxpayer’s relationship with the Government agency.” 2016 T. C. Memo. 19, at pp. 18-19.

Thanks, guys.

  1. Best wishes from the Jersey Boys.


  2. Hi Mr. Taishoff,

    I am the Levine of TC Memo 2005-86 and hold the distinction of being the only US Department of State OBO or FBO, as it once called, independent contractor victor in US Tax Court. Ironically, my case was heard by the same honorable Judge Jacobs who deterimined that Eren was an FBO employee ten years earlier. I have not spoken publicly about why I believe it was determined that I was an independent contractor and other OBO/FBO petitioners were not until this post. Upon reading the above case I felt perhaps it is time to let the cat of the bag!

    I may be fooling myself but I do not think the judge would have ruled in my favor had it not been for another argument included in my brief. Judge Jacobs chose not to address the argument because by ruling, as one commentator wrote, “unbelievably”, that I was an independent contractor he didn’t have to get into the nitty gritty of my constitutional argument. Footnote 2 in the decision states why the argument was not considered.

    There are very few situations where a “common law” employee can be employed by the federal government and my position was not one of them. Therefore, the only way I could be an employee of the federal government was for OBO to follow the requirements of 5 USC 2105. I cited Marbury v. Madison – that an employee of the federal government must be appointed and the nexus that creates that appointment is the SF52 form. No OBO PSC has ever been issued an SF52. The court stated in footnote 2, “We do not need to address this argument because, we find that the petitioner was an independent contractor and not a common law employee of the State Department.”

    I was told by a lawyer friend that judges have vast discretion. I believe that my case is an example of that and it is the reason the that simply using my case as precedence does not result in positive outcomes for other petitioners.

    Your thoughts?

    Best regards,

    Lisa Levine


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