John Michael and Janice Hill Brannon - Page 5




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          granted petitioner's application for exemption from self-                   
          employment tax.                                                             
               Included with petitioners' Federal income tax return for               
          each year in issue is a Schedule C on which petitioners reported            
          the earnings and expenses attributable to petitioner's ministry             
          as follows:                                                                 
                              1987             1988           1989                    
          Gross receipts      $12,150        $13,783        $19,400                   
          Car & truck exp.    4,511          4,786          4,993                     
          Educ. exp.           1,523          440            -0-                      
          Net profit           6,116          8,557          14,407                   

          Petitioners did not treat the net profit for any year as net                
          earnings from self-employment.                                              
               In the notice of deficiency, respondent determined that the            
          services that petitioner provided as a minister during each year            
          in issue were provided as an employee of the Church and that the            
          income and expenses attributable to those services must be                  
          reported accordingly.  Respondent also determined that the income           
          that petitioner earned as a minister was subject to the tax on              
          self-employment income.  Other adjustments made in the notice of            
          deficiency are not in dispute.                                              
                                       OPINION                                        
               Although petitioner's employment status as a Methodist                 
          minister was at one time in dispute, the parties now agree that             
          the services that petitioner performed as a minister during the             





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