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expenditures represent reimbursement of corporate business
expenses.
F. Self-Employment Tax
Section 1401 imposes a tax on the “self-employment income”
of every individual. “[S]elf-employment income” is defined
generally in section 1402(b) as the “net earnings from self-
employment derived by an individual * * * during any taxable
year”. Section 1402(a) defines the term “net earnings from self-
employment” as the “gross income derived by an individual from
any trade or business carried on by such individual, less the
deductions allowed by this subtitle which are attributable to
such trade or business”. Section 1.1402(a)-2(b), Income Tax
Regs., provides that “The trade or business must be carried on by
the individual, either personally or through agents or
employees.”
Petitioners reported $42,000 of income subject to Social
Security on Schedule SE of their 1986 Federal income tax return.
Moreover, petitioners have stipulated that $51,679.84 was
received by Mrs. Bowden from C.B. Crest during the 7-month period
ending July 31, 1989. In the same time period, petitioners have
also stipulated that Mr. Bowden received $17,479.84 in salary.
Also, between January 1 and May 31, 1989, PWIC paid Mrs. Bowden
$4,100 in salary.
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