Estate of Sweeney v. Commissioner

SUPPLEMENTAL MEMORANDUM OPINION

SCOTT, Judge: Our previous opinion, T.C. Memo. 1979-387, directed that the decision in this case be entered under Rule 155 of the Rules of Practice and Procedure of this Court. Pursuant to that direction, respondent on January 25, 1980, filed a Computation for Entry of Decision which was served on January 28, 1980, with notice that objection thereto, accompanied by an alternative computation, should be filed by February 19, 1980. *466 On February 4, 1980, this Court received an informal document on behalf of petitioners disagreeing with respondent's computation with respect to the self-employment tax due by the Estate of J. Shirley Sweeney. Attached to this document was a computation of the self-employment tax of Dr. Sweeney for each of the years 1972 through 1975 which differed from respondent's computation only because it included in the self-employment income of Dr. Sweeney for each of the years 1972 through 1975 the $6,000 amount paid to him by the Southwestern Diabetic Foundation, Inc. In our prior opinion we held this $6,000 to constitute compensation to Dr. Sweeney for each of these years.

Respondent's computation for the years 1972 and 1973 made no change in the self-employment tax computation from that determined in his notice of deficiency. Respondent's computation of self-employment tax for each of the years 1974 and 1975 reduced the self-employment income as shown in the notice of deficiency by an amount which the parties had agreed at the trial was a proper additional deduction for depreciation. Petitioners' computation resulted in a greater deficiency in self-employment tax for each year than*467 did respondent's computation. The amounts of increases were $23.08 for 1972, $480 for 1973, $440.65 for 1974, and $474 for 1975. We filed the informal document received on behalf of petitioners as petitioners' computation and on February 20, 1980, we entered an order directing the parties to file a written response to the opposing party's computation and a memorandum in support thereof on or before March 17, 1980. ¹

*468 Rule 155 provides for a computation by the parties for entry of decision pursuant to the opinion of the Court determining the issues. Rule 155 specifically provides that consideration will not be given to any new issues at an argument with respect to the correct computation of deficiency. We have held that an adjustment which is merely a matter of accounting, such as apportionment of income among beneficiaries of a trust or election to spread certain income over prior years where the statute permits, is not a new issue. See Sparrow v. Commissioner, 18 B.T.A. 1, 20 (1929); Myers v. Commissioner, 12 T.C. 648, 651 (1949). However, we have been just as consistent in holding that a new issue will not be considered at a hearing held under Rule 155. See The John Gerber Company v. Commissioner, 44 B.T.A. 26, 31 (1941); Estate of Samuel Stein v. Commissioner, 40 T.C. 275, 280 (1963); Commissioner v. Meldrum & Fewsmith, Inc., 230 F.2d 283, 284-285 (6th Cir. 1956), affg. 20 T.C. 790 (1953). Therefore the question here is whether the Court's determination that Dr. Sweeney received compensation*469 in the amount of $6,000 from the Southwestern Diabetic Foundation, Inc., in each of the years 1972 through 1975 automatically results in this amount being included in his self-employment income.

Section 1401(a) and (b), I.R.C. 1954, ² imposes a tax on self-employment. Section 1402(a) defines the term "net earnings from self-employment" to mean the gross income derived by an individual from a trade or business carried on by that individual less the deductions attributable thereto. Section 1402(c) defines a trade or business when used with reference to self-employment income or net earnings from self-employment to have the same meaning as used in section 162 except that the term shall not include the performance of services by an individual as an employee. ³Section 1402(b) defines the term "employee" to have the same meaning as when used in chapter 21, section 3101 and following, relating to the Federal Insurance Contributions Act. Insofar as here pertinent, section 3121(d) defines employee to mean "any individual who, under the usual common law rules applicable in determining the employer-employee relationship, has the status of an employee."

*470 A number of cases have been decided in this Court and other courts concerning whether an individual is an employee of the organization from which he receives compensation. These cases have uniformaly held that the question of whether two parties stand in the employer-employee relationship is one of fact-- Simpson v. Commissioner, 64 T.C. 974, 984 (1975); James v. Commissioner, 25 T.C. 1296, 1300 (1956); Azad v. United States, 388 F.2d 74, 76 (8th Cir. 1968).

Other than the question of the proper computation of base period income for income averaging purposes which does not bear on the self-employment tax computation under Rule 155, the only issue litigated in this case was whether the $6,000 paid by the Southwestern Diabetic Foundation, Inc., to Dr. Sweeney for the years 1972, 1973, 1974, and 1975 was a gift or was compensation for services. No issue was raised alternative or otherwise as to whether the $6,000, if compensation, was a payment of salary or wages to Dr. Sweeney as an employee or a payment to Dr. Sweeney as an independent contractor. In order to determine whether the $6,000 is includable in Dr. Sweeney's self-employment*471 income, it is necessary to decide whether the $6,000 was paid to Dr. Sweeney as salary or wages paid to an employee or was paid to him for services as an independent contractor. Since no such issue has been raised or litigated in this case, this issue is a new issue which we do not consider in a hearing under Rule 155. We therefore conclude that respondent's computation in this case is correct under the opinion of the Court filed on September 19, 1979, T.C. Memo. 1979-387, and decision will be entered in accordance with respondent's computation.