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2. Self-Employment Taxes
Respondent determined that petitioners are liable for self-
employment taxes under section 1401 for 1987, 1988, and 1989.
Section 1401 imposes a tax on a taxpayer's self-employment
income. "Self-employment income" includes the net earnings from
self-employment derived by an individual during the taxable year.
Sec. 1402(b). Net earnings from self-employment income means
gross income, less certain deductions, derived by an individual
from any trade or business carried on by such individual. Sec.
1402(a).
Respondent concedes that petitioners are not liable for
self-employment tax for 1987 on $23,615 attributed to them from
their personal use of Earl Kiem Bell/Shores escrow account funds,
and $11,502 from Americana's bank account.
Petitioners bear the burden of proving that they are not
liable for the taxes imposed by section 1401. Rule 142(a).
Petitioners concede that they are liable for self-employment tax
on their real estate income less business deductions. They
argue, however, that they are not liable for self-employment tax
on other amounts on the theory that they did not receive those
amounts, or if received, that those amounts were nontaxable gifts
or loan repayments. Petitioners also argue that petitioner
husband is not liable for self-employment tax on the income he
earned as a real estate dealer selling and renting houses he held
for sale primarily to customers. Sec. 1402(a)(1).
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