Melvin L. Levinson - Page 3




                                        - 3 -                                         

          in which Nordic agreed to pay petitioner $500,000, in five                  
          installments, for the past use of petitioner's patent.                      
          Petitioner and Nordic also entered into a license agreement                 
          relating to Nordic's continued use of petitioner's patent.  In              
          1990, petitioner and Regal entered into a settlement agreement in           
          which Regal agreed to pay petitioner $210,000, in three                     
          installments, for the past use of petitioner's patent.                      
          Petitioner and Regal also entered into a license agreement                  
          relating to Regal's continued use of petitioner's patent.                   
               On his 1993 and 1994 returns, petitioner reported royalties            
          of $158,611 (i.e., $145,000 relating to Regal's settlement                  
          payments and $13,611 from various companies) and $75,810 (i.e.,             
          $75,000 relating to Nordic's settlement payment and $810 from               
          various companies), respectively.  Petitioner also reported                 
          $72,227 and $34,201 of business expenses relating to 1993 and               
          1994, respectively.                                                         
                                       OPINION                                        
               Respondent contends that the settlement awards and royalties           
          petitioner received in 1993 and 1994 are subject, pursuant to               
          section 1401, to self-employment tax.  Petitioner contends he is            
          not in the trade or business of inventing and, therefore, not               
          liable for self-employment tax.                                             
               Section 1401(a) imposes a tax on the self-employment income            
          of every individual.  In general, self-employment income consists           





Page:  Previous  1  2  3  4  5  6  Next

Last modified: May 25, 2011