Sita G. and Mangalore Krishna - Page 5

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            earnings were not "net earnings from self-employment" within the                          
            meaning of section 1402(a) and, therefore, have not met their                             
            burden of proof.  Rule 142(a).  Accordingly, we sustain                                   
            respondent's determination of the self-employment tax in the                              
            amount of $1,240.                                                                         
                  Finally, in the notice of deficiency, after including                               
            unreported income in the amount of $60,552 in petitioners' gross                          
            income and allowing a self-employment tax deduction in the amount                         
            of $620, respondent made computational adjustments to the amounts                         
            allowed for deductions for passive activity losses from rental                            
            real estate and for itemized deductions.  As a result, respondent                         
            determined that petitioners' rental loss should be disallowed to                          
            the extent of $23,576 and that petitioners' itemized deductions                           
            should be disallowed to the extent of $1,372.                                             
                  As petitioners conceded that they have additional income in                         
            the amount of $60,552 and petitioners are entitled to a self-                             
            employment tax deduction in the amount of $620 pursuant to                                
            section 164(f)(1), respondent's computational adjustments to the                          
            amounts allowed for deductions for passive activity losses from                           
            rental real estate and for itemized deductions must be sustained.                         
                  We have considered all of petitioners' remaining arguments                          
            and find them to be without merit.                                                        
                  To reflect the foregoing,                                                           
                                                      Decision will be entered                        
                                                under Rule 155.                                       




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