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deficiency, petitioners filed a Form 1040X, Amended U.S.
Individual Income Tax Return, for 1994 that was received by
respondent on April 23, 1997. On their amended return,
petitioners increased reported gross receipts by $3,749 and also
increased claimed total Schedule C expenses by $8,320, resulting
in a reported net profit from Mr. Secretario's business of
$33,357. Respondent now agrees that this is the correct amount.
Notwithstanding their receipt of net income of $33,357 from
Mr. Secretario's activities as a self-employed insurance
salesman, petitioners failed to file a computation for self-
employment tax and failed to report and pay any self-employment
tax on their original or amended joint returns for 1994.
OPINION
Petitioners argue that they need not pay self-employment
taxes; i.e., Social Security taxes, and therefore did not report
or pay such taxes for their 1994 tax year. Petitioners do not
dispute that Mr. Secretario's income constitutes self-employment
income within the meaning of sections 1401 and 1402.2 However,
2Sec. 1401 imposes a tax on "self-employment income" of
every individual. Sec. 1402(b) defines "self-employment income"
as "net earnings from self-employment". Sec. 1402(a) generally
defines "net earnings from self-employment" as gross income
derived by an individual from any trade or business carried on by
such individual, less deductions allowed. The net income derived
from Mr. Secretario's insurance sales business, as reported on
petitioners' original and amended joint income tax returns for
(continued...)
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