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In defining the concept of earned income for purposes of
section 32, section 32(c)(2)(A)(ii) provides that earned income
means, inter alia, “the amount of the taxpayer’s net earnings
from self-employment for the taxable year (within the meaning of
section 1402(a))”. Section 1402(a), in turn, provides in
pertinent part:
SEC. 1402(a). Net Earnings From Self-Employment.--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 * * * except * * *
(1) * * * rentals from real estate * * *
unless such rentals are received in the course of a
trade or business as a real estate dealer * * *.
Section 1.1402(a)-4(c)(2), Income Tax Regs., provides:
(2) Services rendered for occupants. Payments for the
use or occupancy of rooms or other space where services are
also rendered to the occupant, such as for the use or
occupancy of rooms or other quarters in hotels, boarding
houses, or apartment houses furnishing hotel services, or in
tourist camps or tourist homes, or payments for the use or
occupancy of space in parking lots, warehouses, or storage
garages, do not constitute rentals from real estate;
consequently, such payments are included in determining net
earnings from self-employment. * * *
Petitioner is not a dealer in real estate, nor does he
provide the type of services to tenants enumerated in the
regulations. We note in this regard that petitioner did not
report his real estate rental income for purposes of computing
self-employment tax. For purposes of sections 1402(a) and
32(c)(2), we conclude that petitioner’s real estate rental income
was not earned income. That income ($8,095) falls within the
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Last modified: May 25, 2011