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Mrs. Bot would have continued to do the same farming jobs even if
there were no Agreement.
For all 3 years in issue, petitioners filed their Forms 1040
income tax returns on a married, filing jointly basis. On their
Schedules E, Supplemental Income and Loss, petitioners reported
that Mrs. Bot received net rental income in the amounts of
$17,825, $18,079 and $18,211 in 1993, 1994, and 1995,
respectively. On line 7, Wages, salaries, tips, etc., of their
Forms 1040, petitioners reported that Mrs. Bot received wages in
the amounts of $15,074, $15,165, and $15,296 for 1993, 1994, and
1995, respectively. The identical amounts reported as wages were
deducted as labor hired on the respective Schedules F, Profit or
Loss From Farming, for the years in issue. Mr. Bot failed to
withhold Federal income taxes, State income taxes, Federal
Insurance Contribution Act taxes, and Medicare tax for all 3
years.
In the notice, respondent, inter alia, determined that the
real estate rental payments Mrs. Bot received from Mr. Bot during
the taxable years at issue are includable in Mrs. Bot's net
earnings from self-employment under section 1402(a)(1), and thus
subject to self-employment tax. Respondent also allowed
petitioners a deduction for one-half of the self-employment taxes
imposed for the taxable years at issue.
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