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Because respondent has conceded that petitioner is not
liable for self-employment tax on her 2003 income, petitioner is
not entitled to the deduction provided for in section 164(f),
which allows an individual taxpayer to deduct one-half of his or
her self-employment tax liability from his or her taxable income.
Finally, we note that gross income includes unemployment
compensation. Sec. 85(a).
As we have noted in other cases, it is unfortunate that
petitioner’s employer classified her as an independent contractor
and not as an employee. Had petitioner been classified as an
employee, it is possible that Mimi’s would have withheld the
proper amounts of tax from petitioner’s wages, and a deficiency
in petitioner’s taxes might not have occurred. See, e.g., Lucas
v. Commissioner, supra. But that does not alter the fact that
the first principle of income taxation is that “income must be
taxed to him who earns it”. Commissioner v. Culbertson, 337 U.S.
733, 739-740 (1949) (and cases cited therein).
Petitioner was paid her wages without any reduction for
withheld income tax, and petitioner has not yet fully paid the
tax liability on her income for 2003. We therefore hold that
petitioner is liable for the deficiency in the amount respondent
has determined, appropriately adjusted to incorporate
respondent’s above-mentioned concession.
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