-17-
paid compensation to Mr. Fox, but there is no evidence that
Oxyfresh paid any interest to Mr. Fox or to Prindle. Respondent
has failed to show any link between petitioners and any interest
income. We do not sustain respondent's determination that Mr.
and Mrs. Fox received $2,237 in unreported interest income from
Oxyfresh in 1993. See Sanders v. Commissioner, T.C. Memo. 1997-
452.
E. Self-Employment Tax
Respondent determined and contends that Mr. and Mrs. Fox are
liable for self-employment tax of $10,658 for 1992 and $11,057
for 1993 for payments from Oxyfresh. Section 1401(a) imposes a
tax on self-employment income. Self-employment income is the net
earnings derived by a person from any trade or business carried
on by that person. Sec. 1402(a) and (b).
Mr. Fox earned income from Oxyfresh by selling Oxyfresh
products, recruiting distributors, and conducting motivational
workshops 3 weeks per month. Before the years in issue, Mr. Fox
treated his income from Oxyfresh as self-employment income. He
did not substantially change the manner in which he conducted his
work for Oxyfresh after Smith formed Prindle. Thus, those
payments are subject to self-employment tax. Sec. 1402(a).
Petitioners contend that Mr. Fox had no self-employment
income if we recognize Prindle as a trust for Federal tax
purposes. However, we do not recognize Prindle as a trust for
Federal tax purposes for reasons stated in paragraph B, above.
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