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Respondent's disallowance of home mortgage interest for 1989
will be sustained.
Self-Employment Tax
Section 1401 provides for a tax on the self-employment
income of every individual. "Self-employment" income means the
net earnings from self-employment derived by an individual. Sec.
1402(b). Net earnings from self-employment income is the gross
income derived by an individual from any trade or business
carried on by such individual, less the deductions allowed by
this subtitle that are attributable to such trade or business.
Sec. 1402(a).
Petitioner had income from L&L in excess of the amount he
reported on his 1988 Schedule C and Schedule SE. Accordingly,
petitioner is liable for additional self-employment tax.
Respondent's determination will be sustained on this issue.
Additions to Tax and Penalty
Sections 6653(a)(1) and 6662
Respondent determined that petitioners are liable for the
section 6653(a)(1) addition to tax for 1988. Section 6653(a)(1)
imposes an addition to tax equal to 5 percent of the underpayment
if any part of the underpayment is due to negligence or an
intentional disregard of rules or regulations.
Respondent determined that petitioners are liable for the
section 6662(a) penalty for 1989. Section 6662(a) imposes a
penalty in an amount equal to 20 percent of the underpayment of
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