Idaho Ambucare Center, Inc. v. United States

We must decide whether physicians who were officers of a corporation operating a clinic are also employees of the corporation for federal income tax purposes.

I

Idaho Ambucare Center (“Ambucare”), an Idaho corporation, provides an out-patient surgery facility and support staff for physicians in the Nampa, Idaho area. Incorporated in 1982, Ambucare was initially owned by nine physicians, each of whom was a shareholder and a member of Ambucare’s Board of Directors. Dr. William Crepps was one of these original shareholders. Dr. Crepps also served as Ambucare’s secretary and treasurer from the opening of the business in February 1983 until his resignation from Ambu-care in February 1985.

Dr. Crepps, through his professional corporation, Dr. William F. Crepps, M.D., P.A. (“Crepps, P.A.”), entered into a contract with Ambucare, whereby Crepps, P.A. would provide managerial services; in exchange, Am-bucare would pay Crepps, P.A. $2500 per month. The management agreement expressly stated that Dr. Crepps was an independent contractor, and not an employee; as such, the agreement did not entitle Crepps to any employee benefits from Ambucare. The agreement was effective for a three-year…