Mark’s Proper Tax Treatment

There are five criteria to identify Mark’s proper tax treatment.

Criterion 1: Control

Mark beautified the campus under a contract of service. Thus, he is subject to control by the university because the university restricted Mark’s choice of art to specify artists. What’s more, the color schemes and the types of art selected were also under the control of the University of Toronto. However, Mark can organize and produce or purchase the art he desired. In addition, he had artistic discretion over the actual pieces chosen. Thus, he has some power to control. Therefore, the University of Toronto did not have complete control over Mark’s activities. And we cannot assume he was an independent contractor or an employee because the result of this criterion is inconclusive and the issues of control falling to both parties.

Criterion 2: Ownership of tools (economic reality test)

In this case, Mark used his own studio and used his own tools for his own productions. Moreover, he could produce the art himself, purchase another artist's work, or focus on any theme he desired. In addition, the University offered him an office to meet with other artists, and it is an optional for Mark to do this. It is reasonable to assume that Mark owns any equipment necessary to beautify the campus. This criterion would indicate Mark is an independent contractor.

Criterion 3: Financial risk (economic reality test)

Mark is exposed to financial risks that an employee would not have to bear:

He purchases produce the art himself and acquire another artist's work for the university.

If the University did not like the art he produced or bought, he might have a risk by losing money and wasting times for these products.

He used his own studio to produce the art and spent his own money on purchases before the university reimbursed costs. Thus he runs the risk of financing the arts, supplying the necessary tools, and he must assume all the costs associated with it.

From the facts given,...