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C. Self-Employment Income
Respondent determined that petitioner is liable for self-
employment tax on the income petitioner diverted to Arivada in
1993 and 1994. Section 1401 imposes a tax on an individual's
self-employment income. Self-employment income is the net
earnings derived by an individual from any trade or business
carried on by that person. See sec. 1402(a) and (b).
Petitioner contends that he had no self-employment income
because Arivada is a trust for Federal tax purposes. We
disagree. Petitioner earned income by providing services to
patients. Petitioner treated the income from his practice as
self-employment income on his 1991 and 1992 returns. He did not
substantially change how he conducted his practice after Arivada
was formed. The payments that he diverted to Arivada are subject
to self-employment tax. See sec. 1402(a). Thus, petitioner is
liable for self-employment tax on income he diverted to Arivada
($58,989 in 19937 and $78,772 in 1994).
7 As a result of respondent’s concession that petitioner had
less income for 1993 than determined, petitioner’s self-
employment tax liability for 1993 will be less than determined in
the notice of deficiency.
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