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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