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farm the property, but he applied herbicide and shredded natural
grasses to the property. After considering the provisions of
Rev. Rul. 60-32, 1960-1 C.B. 23, the Court found that the
taxpayer was an "active farmer/rancher" with respect to other
acreage. The Court regarded the payments as having a direct
nexus to his trade or business of farming, and, on this basis,
the Court held that the payments were subject to self-employment
taxes. In Ray v. Commissioner, supra, the Court did not address
whether the payments qualified under the rental exclusion
provisions of section 1402(a)(1). In contrast, because we have
found that the CRP payments herein are rentals, such payments are
not subject to self-employment taxes even if a nexus exists
between the CRP payments and petitioner's farming trade or
business.
In Rev. Rul. 60-32, supra, the Internal Revenue Service
(IRS) ruled that certain payments received under the Soil Bank
Act, title I of the Agricultural Act of 1956, ch. 327, 70 Stat.
188 (formerly 7 U.S.C. 1801), were includable in gross income and
concluded that such payments were "in the nature of receipts from
farm operations in that they replace income which producers could
have expected to realize from the normal use of the land devoted
to the program." Rev. Rul. 60-32, 1960-1 C.B. at 25. Without
any further analysis, the IRS ruled that the payments and
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