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Before the establishment of the CCJT, petitioner reported
the net income he derived from the jewelry business as net
earnings from his trade or business, and petitioner paid self-
employment taxes on it. The Castros do not dispute that
petitioner continued to work in the jewelry business after the
CCJT was established.
Section 1401 imposes a tax on the self-employment income of
every individual for old age, survivors, and disability
insurance, and hospital insurance. See sec. 1401(a) and (b);
George v. Commissioner, supra; sec. 1.1401-1(a), Income Tax Regs.
Self-employment income “means the net earnings from self-
employment derived by an individual”. Sec. 1402(b). Net
earnings from self-employment “means the gross income derived by
an individual from any trade or business carried on by such
individual, less the deductions allowed by this subtitle which
are attributable to such trade or business”. Sec. 1402(a); see
also sec. 1.1402(a)-1, Income Tax Regs.
The Castros have offered no reason other than their belief
that the CCJT owned the jewelry business to explain why the net
income from the jewelry business is not self-employment income to
petitioner. Since we have concluded that the CCJT must be
disregarded for Federal income tax purposes, it follows that the
net income of the jewelry business represents petitioner’s net
earnings from self-employment and that petitioner is liable for
self-employment taxes on that income for the years at issue. We
so hold.
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