Richard S. Holbrook - Page 6




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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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