- 12 -
We therefore find that the payments petitioner received from
the companies are not dividends excluded from self-employment tax
under section 1402.
Petitioner also referred to the payments as royalties.
Royalties are defined as payments received for the right to use
intangible property rights, and that definition does not include
payments for services. Sierra Club, Inc. v. Commissioner, 86
F.3d 1526, 1535 (9th Cir. 1996) (defining royalties for the
purposes of section 512(b)), affg. in part and revg. in part 103
T.C. 307 (1994); see also Disabled Am. Veterans v. Commissioner,
94 T.C. 60, 72 (1990) (the regulations define royalties, other
than mineral, oil, or gas royalties, for personal holding company
purposes, as "amounts received for the privilege of using
patents, copyrights, secret processes and formulas, good will,
trade marks, trade brands, franchises, and other like
property."), revd. 942 F.2d 309 (6th Cir. 1991); sec. 1.543-
1(b)(3), Income Tax Regs. Petitioner has not provided any
persuasive evidence that the payments he received from the
companies were for the right to use his intangible property
rights, if any, and not for services.
We do not need to resolve the question of whether the
payments petitioner received from the companies are royalty
payments to decide this case. Royalty payments, unlike
dividends, are not specifically excepted from self-employment tax
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 Next
Last modified: May 25, 2011