- 4 - Subject to irrelevant exclusions, self-employment income means net earnings from self-employment. See sec. 1402(b). Net earnings from self-employment generally include gross income derived from any trade or business carried on by the individual, less allowable deductions attributable to such a trade or business. See sec. 1402(a). However, in a community property State, if any of the income derived from a trade or business is community property under that State’s community property laws, “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 such trade or business”. Sec. 1402(a)(5)(A). Respondent points out that Ms. McGowan did not exercise any management or control over petitioner’s business during the year in issue, and argues that pursuant to section 1402(a)(5)(A), petitioner’s 1995 self-employment tax liability is computed without taking into account the community property laws of California. According to petitioner, section 1402(a)(5)(A) does not apply because it “only serves as a protection to taxpayers who, in the absence of such provision, could be subject to double the amount of self-employment tax intended by Congress.” In effect, petitioner argues that in the case of a taxpayer subject toPage: Previous 1 2 3 4 5 6 7 Next
Last modified: May 25, 2011