Connie D. Ray and Roma Kay Ray - Page 4

                                          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             






Page:  Previous  1  2  3  4  5  6  7  Next

Last modified: May 25, 2011