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taxes, Federal Insurance Contribution Act taxes, and Medicare tax
for all 3 years.
In the notice of deficiency, respondent, inter alia,
determined that the real estate rental payments Mrs. Hennen
received from Mr. Hennen during the taxable years at issue are
includable in Mrs. Hennen'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.
On the Forms 4797, Sales of Business Property, attached to
their returns, Mr. and Mrs. Hennen reported gains of $24,046 from
a sale of 78 acres in 1994, and "0" gains from the sale of a
sprayer in 1995.
OPINION
Section 1401 provides that a tax shall be imposed on the
self-employment income of every individual. Generally, rentals
from real estate are excluded from the computation of net
earnings from self-employment. Sec. 1402(a)(1). However,
section 1402(a)(1) also provides that rentals derived by the
owner or tenant of land are not excluded from the computation of
net earnings from self-employment if:
(A) such income is derived under an arrangement, between the
owner or tenant and another individual, which provides that
such other individual shall produce agricultural * * *
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