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On their 1990 and 1991 joint Federal income tax returns,
petitioners also claimed loss carry-forward deductions in the
respective amounts of $137,047 and $86,367 relating to an
investment in a limited partnership. The claimed $137,047 loss
carry-forward deduction for 1990 was reflected on line 18 of
petitioners’ 1990 joint Federal income tax return as a
partnership loss. It was not reflected as a Schedule C business
expense deduction.
The claimed $86,367 loss carry-forward deduction for 1991
relating to the investment in the limited partnership, however,
was reflected on Schedule C of petitioners’ 1991 joint Federal
income tax return as a business expense deduction.
By claiming the alleged pension plan contributions for 1990
and 1991 and the claimed partnership loss for 1991 as deductions
on Schedule C of petitioners' joint Federal income tax returns,
petitioners' reported self-employment income was reduced, and no
self-employment tax liability was reported as due on petitioners’
1990 and 1991 joint Federal income tax returns.
OPINION
Generally, taxpayers are required to pay employment taxes on
net earnings from self-employment. Sec. 1401(a). Net earnings
from self-employment are defined in section 1402(a) as gross
income derived by self-employed individuals from any trade or
business less certain enumerated expenses. Contributions to
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