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LMN Corporation classified many of its workers as independent contractors, but that classification became the subject of litigation and was determined to be erroneous. Which of the following does not support a safe harbor defense for LMN?

a.An opinion from its corporate counsel.
b.The classification is consistent with industry practice.
c.A previous IRS ruling found these workers to be independent contractors
d.An IRS ruling in a case involving JKL Co. found similarly situated workers to be independent contractors.

User Eric Farr
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1 Answer

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Final answer:

LMN Corporation does not support a safe harbor defense based on an IRS ruling for a different company (JKL Co.), as the ruling was not specific to LMN's situation and thus is not directly relevant.

Step-by-step explanation:

The question pertains to a legal concept known as the 'safe harbor defense' as it applies to worker classification under tax law. A company can use the safe harbor defense to avoid penalties for misclassifying workers as independent contractors when they are actually employees if the company can show that it had a reasonable basis for doing so. However, to qualify for this defense, the reliance must be on precedent directly relevant to the company's situation.

The options which may support a safe harbor defense for LMN Corporation include: an opinion from its corporate counsel, suggesting that it sought professional advice; the classification is consistent with industry practice, implying that LMN Corporation was following a common standard; a previous IRS ruling found these workers to be independent contractors, meaning there was a clear precedent for this classification. However, an IRS ruling in a case involving JKL Co. found similarly situated workers to be independent contractors is not as directly relevant, as the ruling applied to a different entity and may not align exactly with LMN's circumstances. Therefore, this option does not support a safe harbor defense for LMN Corporation.

User Szymonm
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