7
The term "earned income" is defined by section 401(c) as the
net earnings from self-employment as defined in section 1402(a),
but "only with respect to a trade or business in which personal
services of the taxpayer are a material income-producing factor."
Sec. 401(c)(2)(A)(i). Under section 1402(a), "net earnings from
self-employment" is defined, in relevant part, as gross income
earned by a taxpayer from a business carried on by the taxpayer,
less deductions allowed which are attributable to such business.
For the year at issue, petitioner reported a net loss for
King International and, consequently, had no net earnings from
self-employment. We reject petitioner's argument that his
interest income should be taken into consideration because such
income is not "derived by an individual from any trade or
business carried on by such individual". Sec. 1402(a). We find
that petitioner had no "earned income" from his business
activities within the meaning of section 401(c) and, therefore,
is not entitled to deduct self-employed health insurance
expenses. Respondent is sustained on this issue.
The final issue for consideration is whether petitioner is
entitled to a deduction for a contribution of $950 to an IRA. In
general, a taxpayer is entitled to deduct amounts contributed to
an IRA. Sec. 219(a); sec. 1.219-1(a), Income Tax Regs. The
deduction in any taxable year, however, may not exceed the lesser
of $2,000 or an amount equal to the compensation includable in
the taxpayer's gross income for such taxable year. Sec.
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