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c. Petitioners’ Income Tax Returns and Respondent’s
Determinations
Petitioners timely filed their 1994 and 1995 Federal income
tax returns. With respect to self-employment tax, petitioners
did not complete and attach to either return a Schedule SE,
Computation of Self-Employment Tax.
Respondent made adjustments to Mr. Fultz’s self-employment
income of $9,618 for 1994 and $14,380 for 1995, which reflect the
amounts he ultimately received from Fultz Farms per the lease
related to the value-added payments, and in each year the
adjustment is less than the actual value-added payments to Mr.
Fultz. We accept this as a partial concession by respondent, but
our holding is based upon the original payments from MCP to Mr.
Fultz, not petitioners’ relationship with Fultz Farms.
Respondent completed and attached to the notice of deficiency
Schedules SE for Mr. Fultz’s self-employment tax for the years at
issue. No self-employment tax was determined for Mrs. Fultz for
1994 or 1995. Respondent also determined that petitioners are
entitled to a deduction equal to one-half of the amount of Mr.
Fultz’s self-employment tax liability.
OPINION
This case presents the question whether value-added payments
Mr. Fultz received from MCP, a Minnesota agricultural
cooperative, are subject to self-employment tax under section
1401(a). Payments from MCP have previously been the subject of
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