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Abraham v. Commissioner, T.C. Memo. 1988-412, despite
petitioner's arguments to the contrary. Petitioner devoted his
time and effort to increasing the productivity of the
distributors at all levels; it was his expectation that well-
trained first-level distributors would develop successful lower
level distributors who were likely to generate commission income
for him.
During the year under consideration petitioner regularly and
continuously engaged in selling the companies' products, and
especially, recruiting distributors. Accordingly, we find that
the payments that petitioner received from the companies for
sales made by the down-line distributors are gross receipts from
petitioner's trade or business.
Issue 2. Whether the Net Profit From Petitioners' Trade or
Business Is Subject to Self-Employment Tax
Section 1401 imposes a tax on an individual's net earnings
from self-employment. In general, self-employment income
consists of the net earnings derived by an individual from a
trade or business carried on by him as a sole proprietor, or by a
partnership of which he is a member. Sec. 1.1401-1(c), Income
Tax Regs. The term "net earnings from self-employment" is
defined as the gross income derived by an individual from any
trade or business less any allowable deductions attributable to
the trade or business. Sec. 1402(a). The term "trade or
business", when used with reference to self-employment income or
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