Tax Problem Seven Andy Fred, a resident of Minnesota, has been a driver for Olive Delivery Service for the past six years. For this purpose, he leases a truck from Olive, and his compensation is based on a percentage of the income resulting from his pickup and delivery services. Olive allows its drivers to choose their 10-hour shifts and does not exercise any control on how these services are carried out (e.g., the route to be taken or the order in which parcels are delivered or picked up). Under Olive's operating agreement with its drivers, Olive can terminate the arrangement after 30 days' notice. In practice, however, Olive allows its truckers to quit immediately without giving advance notice. The agreement also identifies the drivers as independent contractors. Olive maintains no health or retirement plans for its drivers, and each year it reports their income by issuing Forms 1099- MISC (and not Forms W-2). Olive requires its drivers to maintain a commercial driver's license and be in good standing with the state highway law enforcement division. Citing the employment tax Regulations in $$ 31.3121(d)- 1(c)2) and 31.3306(0)-1(b), an IRS agent contends that Andy is an independent contractor and therefore, is subject to the self-employment tax. Based on Peno Trucking, Inc. (93 TCM 1027, T.C.Memo. 2007-66), Andy disagrees and contends that he is an employee (i.e. not self-employed). Who is correct? Why? Required: 1. Research the above issue. 2. Locate Regulations in SS 31.3121(d)-1(c)(2); 31.3306(1)-1(b) and Peno Trucking, Inc. (93 TCM 1027, T.C.Memo 2007-66) in Checkpoint Edge. 3. Prepared a tax file memo addressing the above tax issue. Follow the format displayed in Exhibit 2.9 of the textbook (also displayed on page two of this document. 4. Submit your tax file memo to the appropriate assignment folder on D2L Brightspace