Rev. Rul. 84-91

1984-1 C.B. 203.

                       Internal Revenue Service
                                 Revenue Ruling

                RAILROAD RETIREMENT;  EMPLOYER;  CASUAL SERVICE

                            Published: June 25, 1984

Section 2522. - -Charitable and Similar Gifts, 26 CFR 25.2522(c)(3):  Transfers not exclusively for charitable, etc., purposes in the case of gifts made after July 31, 1969.

Section 3231. Definitions, 26 CFR 31.3231(a)-1: Who are employers.

  Railroad retirement;  employer;  casual service. Insubstantial railroad- related services performed by a company that is wholly owned by a railroad fall within the "casual service" exception contained in section 3231(a), even though they are regularly carried on.

ISSUE

  Under the circumstances described below, is a company an "employer" within the meaning of section 3231(a) of the Internal Revenue Code, relating to the Railroad Retirement Tax Act?

FACTS

  X is a wholly owned subsidiary of a railroad company that is a "carrier" as defined in section 3231(g) of the Code.  Although the majority of X's business activities is nonrailroad related, X regularly provides nontrucking services in connection with the transportation of property by railroad.  These services constitute less than 4 percent of X's overall activities and generate less than 4 percent of X's gross receipts.

LAW AND ANALYSIS

  For purposes of the Railroad Retirement Tax Act, the term "employer" means any carrier as defined in section 3231(g) of the Code and any company that is directly or indirectly owned or controlled by a carrier and that performs any service, except trucking or casual service, in connection with the transportation of passengers or property by railroad.  Section 3231(a).  The Railroad Retirement Act contains a similar definition.  45 U.S.C. sections 231(a)(1)(i) and (ii) (Supp.1983).

  Because X is owned by a carrier and performs nontrucking services in connection with the transportation of property by railroad, X is an employer within the meaning of section 3231(a) of the Code, unless the services X performs are "casual services."

  Section 202.6 of the regulations under the Railroad Retirement Act, 20 C.F.R. (1982), provides, in part, that the service rendered by a controlled company or person in connection with the transportation of passengers or property by railroad is "casual" whenever the service is so irregular or infrequent as to afford no substantial basis for an inference that the service will be repeated, or whenever the service is insubstantial.

  In Adams v. Railroad Retirement Board, 214 F.2d 534 (9th Cir. 1954), the court stated that the definition of "casual" in 20 C.F.R. section 202.6 is a fair statement of the usual or common meaning of that term.  See Rev. Rul. 77- 386, 1977-2 C.B. 356; Rev. Rul. 77-455, 1977-2 C.B. 357.

  Here, the services X renders in connection with railroad transportation constitute less than 4 percent of X's overall activities and generate less than 4 percent of X's gross receipts.  X's railroad related activities are thus insubstantial and so fall within the "casual service" exemption contained in section 3231(a) of the Code.  Compare Rev. Rul. 69-42, 1969-1 C.B. 266, and Rev. Rul. 69-306, 1969-1 C.B. 267, in which the services performed were not considered to be "casual."

HOLDING

  X is not an "employer" within the meaning of section 3231(a) of the Code.

Rev. Rul. 84-91, 1984-1 C.B. 203.