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whether the taxpayer’s trade or business is the source of an item
of gross income.
The statutory phrase in question is “net earnings from self-
employment”, which is defined in section 1402(a) as “gross income
derived by an individual from any trade or business carried on by
such individual [less certain deductions]”. The only term that
suggests that less than all of the trade or business income of an
individual is subject to tax is the term “carried on”. S. Rept.
1669, 81st Cong., 2d Sess. (1950), 1950-2 C.B. 302, is the report
of the Committee on Finance that accompanied H.R. 6000, which was
enacted as the Social Security Act Amendments of 1950,
ch. 809, 64 Stat. 477, which included the Self-Employment
Contributions Act. That report indicates that Congress used the
verbal phrase “carried on” in a relational sense, to describe a
business conducted or operated by the individual subject to the
tax (as opposed to someone else):
The trade or business must be “carried on” by the
individual either personally or through agents or
employees, in order for the income to be included in
his “net earnings from self-employment.” Accordingly,
gross income derived by an individual from a trade or
business carried on by him does not include income
derived by a beneficiary from an estate or trust even
though such income is derived from a trade or business
carried on by the estate or trust. [S. Rept. 1669,
supra, 1950-2 C.B. at 354.]
See also H. Rept. 1300, 81st Cong., 1st Sess. (1949), 1950-2 C.B.
255, 294.
Clearly, the trade or business need not currently be carried
on by the individual; a past carrying on will do. See Schumaker
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