Derwyn J. Booker - Page 19

          of unemployment compensation includable in gross income is equal            
          to the lesser of one-half of the amount of the excess of such sum           
          over the base amount, or the amount of the unemployment                     
          compensation.  Petitioner’s base amount equals $12,000.  See sec.           
          85(b)(1).  Petitioner argues that the unemployment compensation             
          he received is not taxable under section 85 because his adjusted            
          gross income in 1984 fell below his base amount of $12,000.                 
               Our determination that petitioner is not entitled to any               
          deductions or an investment tax credit with respect to his                  
          dealings with Encore and that he is not entitled to a business              
          bad debt deduction in connection with Carter results in an upward           
          adjustment in petitioner’s adjusted gross income for 1984,                  
          bringing him over the base amount of $12,000.  Accordingly, the             
          $5,312 petitioner received in unemployment compensation is                  
          includable in his gross income for 1984.  We sustain respondent’s           
          determination on this issue.                                                
          Issue 4.  Self-Employment Tax                                               
               Section 1401 imposes a self-employment tax on the self-                
          employment income of every individual.  Individuals whose net               
          self-employment income equals or exceeds $400 during the taxable            
          year are required to report such income.  Sec. 6017.  Petitioner            
          argues that his net self-employment income did not exceed $400 in           
          1984.  We have determined, however, that petitioner is not                  
          entitled to various claimed deductions, causing petitioner’s net            

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