Lee Mizell and Pearlene Mizell - Page 6

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            position that the arrangement with respect to the production of                           
            agricultural products did not provide for material participation                          
            by petitioner, and therefore, the rental income cannot be                                 
            considered self-employment income.  Respondent disagrees and                              
            argues that the arrangement did provide for petitioner's material                         
                  There apparently is no dispute between the parties that                             
            petitioner's conduct in connection with the production of                                 
            agricultural products on his property constituted material                                
            participation within the meaning of the statute and regulations.                          
            There is also apparently no dispute that as a result of the                               
            partnership agreement and the general understanding with his                              
            sons, petitioner was obligated and expected to "materially                                
            participate" in the production of agricultural products on his                            
            property.  It seems that the dispute between the parties focuses                          
            upon the construction of the word "arrangement" as used in                                
            section 1402(a)(1) and the corresponding regulations, and further                         
            upon the extent of the obligations imposed upon petitioner                                
            pursuant to the leases.                                                                   
                  Petitioners argue that the leases provide the exclusive                             
            basis for determining the terms of the arrangement regarding the                          
            production of agricultural products on petitioner's property.                             
            Petitioners further argue that the leases impose no obligation on                         
            petitioner to materially participate in the production of                                 
            agricultural products on the property.  Although not expressly                            

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