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renewal commissions in 1990, are not subject to self-employment
tax.
In the notice of deficiency respondent determined that the
amounts Mr. Lencke received as residual premiums and in lieu of
renewal commissions constitute income from self-employment within
the meaning of section 1401 and, therefore, were subject to self-
employment tax.
Accuracy-Related Penalties
Petitioners' Federal income tax returns for 1990, 1991, and
1992 were prepared by an attorney.
Petitioners reported a tax liability of only $392 on their
1990 Federal income tax return. They failed to report net income
received in lieu of renewal commissions for 1990. Their tax
liability was substantially understated for that year.
Petitioners claimed depreciation deductions on the Schedule
C attached to their 1991 and 1992 Federal income tax returns for
several items for which they have conceded they were not entitled
to depreciation deductions. The items for which petitioners
claimed depreciation deductions included a boat, lawn mower, and
sprinkler, which were personal assets. They failed to maintain
or present adequate substantiation to support some deductions
claimed on their tax returns for 1991 and 1992.
Respondent determined in the notice of deficiency that
petitioners are liable for accuracy-related penalties under
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