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We held above that petitioners failed to prove that they did
not have unreported income in the amounts asserted by respondent.
They have not proven that they did not receive that income, nor
have they proven that it is not subject to self-employment tax.
Petitioner husband received refunds for items, such as insurance
and utilities, that he deducted as business expenses. The
refunds are includable in petitioners' income and are subject to
self-employment tax.
An individual who is engaged in the business of selling
real estate to customers may be classified as a real estate
dealer. Sec. 1.1402(a)-4(a), Income Tax Regs. Rentals from real
estate and the related deductions are excluded from net earnings
subject to self-employment tax unless the rentals are received in
the course of a taxpayer's trade or business as a real estate
dealer. Sec. 1402(a)(1); Hopper v. Commissioner, 94 T.C. 542,
545 (1990); sec. 1.1402(a)-4(a), Income Tax Regs.
Whether property is held by a taxpayer for investment or for
sale to customers in the ordinary course of his trade or business
is a question of fact. Cottle v. Commissioner, 89 T.C. 467, 486
(1987); Daugherty v. Commissioner, 78 T.C. 623, 628 (1982). As
discussed below, we hold that petitioner husband was a dealer in
real estate. Thus, the rentals are subject to self-employment
tax. Sec. 1402(a)(1); Rockwell v. Commissioner, T.C. Memo. 1972-
133, affd. 512 F.2d 882 (9th Cir. 1975). Petitioners have failed
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