- -30
collateral from Mr. Kluzak. We find no evidence that the loan
had any connection with any of petitioner's and Mr. Kluzak's
joint business transactions or with any other business entity.
We, therefore, hold that the worthless debt was not a business
bad debt as reported on the return, but rather resulted either
from a loss on an investment or a personal loan.
Next at issue is whether petitioners are liable for self-
employment tax for the years at issue. Respondent contends that
payments petitioner received after petitioner left the law
partnership were subject to self-employment tax. Petitioner's
position is that the payments petitioner received were from the
sale of his interest in the law partnership and, therefore, not
subject to self-employment tax.
Section 1401 imposes taxes on the self-employment income of
every individual. Section 1402(b) defines self-employment income
as the net earnings from self-employment derived by an
individual. Section 1402(a) defines an individual's net earnings
from self-employment as the gross income derived by an individual
from any trade or business carried on by such individual, reduced
by income tax deductions attributable to the trade or business.
Section 1402(a) specifically includes income of a general partner
from trade or business income earned by his partnership. See
Ware v. Commissioner, 906 F.2d 62 (2d Cir. 1990), affg. T.C.
Memo. 1989-165. Whether a payment is derived from a trade or
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