4
They did, however, apparently deduct the expenses incurred on the
CRP land as expenses incurred in a trade or business on Schedule
F of their return; i.e., taxes, interest, shredding, spraying,
and depreciation.
Initially, we note that there is no dispute as to the
taxability of the CRP receipts to petitioners in 1990 as being
ordinary taxable income. Petitioners concede that this is so,
and so reported it in their 1990 return. The dispute is rather
whether such income received by petitioners is income from self-
employment and subject to the tax thereon.
Section 1401 imposes taxes on the self-employment income of
every individual, and this is in addition to the ordinary income
tax. Section 1402(a) defines an individual's net earnings from
self-employment as the "gross income derived by an individual
from any trade or business carried on by any such individual",
and, in turn, section 1402(b) defines self-employment income as
the "net earnings from self-employment derived by an individual".
In considering the application of this tax, this Court has
stated that the income in question must derive from a trade or
business carried on by an individual, and that there must be a
nexus between such trade or business and the income that the
individual has received. In Newberry v. Commissioner, 76 T.C.
441, 444 (1981), the taxpayers received insurance proceeds
intended to compensate them for lost income after their grocery
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