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subject to self-employment tax.13 The Robinsons contend that they
were officers and employees of Career and, as such, were not
subject to self-employment tax.
Section 1401(a) imposes tax on a taxpayer’s self-employment
income. The tax is imposed on the gross income derived by an
individual from any trade or business carried on by the
individual, less deductions. The term “trade or business” in
section 1402 has the same meaning as it does for purposes of
section 162. Sec. 1402(c). The carrying on of a trade or
business for purposes of self-employment tax generally does not
include the performance of services as an employee. Sec.
1402(c)(2). Section 1402(d) references section 3121 (relating to
the Federal Insurance Contributions Act) for the definition of
the term “employee”, as follows: (1) Any officer of a
corporation; or (2) any individual who, under the usual common
law rules applicable in determining the employer-employee
13 We note that the Robinsons have not shown that there was
a factual predicate for reporting discharge of indebtedness
income; i.e., they have not shown the identity of the creditor,
the amount and terms of the indebtedness, or the cancellation
event. The existence of a debtor-creditor relationship is a
necessary predicate to a finding of cancellation of indebtedness
income. Millar v. Commissioner, 540 F.2d 184, 186 (3d Cir.
1976).
On brief, the Robinsons argue that they received the income
as employees of Career and not self-employed individuals. Even
though the Robinsons reported the income as being from discharge
of indebtedness, respondent does not argue that the Robinsons’
reporting position prohibits their now claiming the amounts to be
compensation. Respondent contends that the income is
compensation from self-employment.
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