Ezel / IRS Rulings / 201012040

CCA 201012040: Employment and self-employment tax treatment depends on the facts

Number
201012040
Outcome
Advice
Document type
Chief Counsel Advice
IRS subject
Common Law Tests
Topics
Employment taxes
Code sections
§ 3121
Ruling dated
February 18, 2010
Publicly released
March 26, 2010
Source
View Official PDF

Apply this to your situation

This page covers legal advice the IRS Office of Chief Counsel wrote for IRS staff, issued in 2010, which can't be cited as precedent. Ask about your situation and see what the current Code and IRS guidance say, with citations.

Currency note: this determination was released in 2010
Statutory amendments, regulation changes, court decisions, or later IRS guidance may have changed the analysis since then. Treat this page as historical context, not current tax advice. Verify current law before relying on any specific rule, threshold, or position mentioned here.
Not precedent. Under 26 U.S.C. § 6110(k)(3), this written determination may not be used or cited as precedent. It is advice from the IRS Office of Chief Counsel to IRS personnel on the facts they presented, and identifying details were redacted by the IRS before release. The official IRS release (linked on this page as a PDF) is the authoritative source.
About this page: The plain-English summary and ruling snapshot below were written by Ezel based on the official IRS release. The full text is the IRS's own document.
View official IRS release (PDF)

Plain-English summary

Chief Counsel Advice considered the tax treatment of a for-profit entity and related employment and self-employment tax issues. The advice stated that there was no reason the entity would not be subject to income tax. It considered self-employment tax questionable because that result would require an underlying trade or business, which might not exist in some situations. It also considered an employment relationship even less likely on the facts presented and noted a possible statute issue if no Forms 941 had been filed.

Ruling snapshot

  • Question: How should a for-profit entity and related individuals be treated for income, self-employment, and employment tax purposes?
  • Outcome: Advice given
  • Key authorities: IRC § 3121

Full text (IRS public release)

ID: CCA_2010021810005341 Number: 201012040
Release Date: 3/26/2010
Office: -----------------------------
UILC: 3121.04-01

From: ---------------
Sent: Thursday, February 18, 2010 10:00:58 AM
To: -----------------------
Cc: ---------------------
Subject: RE: Inquiry

Thanks, I recall our email dialogue about this. I know you said it's a for-profit entity, but being that the issue could also come up in EO context, I'm copying --------------- in case he has any thoughts on the issue.

  1. I would agree--I see no reason it wouldn't be subject to income tax. ----------------------------------------------
    ------------------------- Imposition of SECA tax here would be questionable due to the need for an underlying trade or business, a highly factually question that is likely not to be satisfied in at least some of the situations.

  2. I think an employment relationship is even more unlikely on the facts and ---------------------------------------
    -----------------------------------------------------------------------------------------. I suppose we don't have a statute problem on the ET if there were no 941s filed, ------------------------------------------------------------------------------

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Let me know if you want to discuss.

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