- 14 - Issue 2. Self-Employment Tax In the notice of deficiency issued to petitioner Paul I. Yoshihara, respondent determined that he was liable for self- employment tax on the unreported income from landscaping services. Section 1401 imposes a tax on the self-employment income of every individual. An individual's self-employment income depends on his "net earnings from self-employment". Sec. 1402(b). In relevant part, the term "net earnings from self- employment" means the gross income derived by an individual from any trade or business carried on by such individual less allowable deductions attributable to such trade or business. See sec. 1402(a). Under section 1402(a)(5), where the income from a trade or business is community income, as in this case, all of the gross income and deductions attributable to such trade or business shall be treated as the gross income and deductions of the husband, unless the wife exercises substantially all of the management and control of the trade or business, in which case all such gross income and deductions shall be treated as hers. Accordingly, under section 1401, the spouse deemed to have management and control of the business activity is subject to self-employment tax, and the tax is computed on the total gross income less the total deductions of the business, notwithstanding the attribution of one-half of the income to the other spouse for income tax purposes.Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 Next
Last modified: May 25, 2011