118 T.C. No. 8
UNITED STATES TAX COURT
RICHARD J. BOT AND PHYLLIS BOT, Petitioners v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 14155-98. Filed February 15, 2002.
Ps maintained active memberships in an
agricultural cooperative, which processed and sold corn
produced by its members. As active members, Ps were
obligated to produce and deliver corn to the
cooperative regularly, and, during 1994 and 1995, they
met that obligation with corn they acquired from a
“pool” maintained by the cooperative. The cooperative
processed and sold the corn for Ps’ benefit and paid to
Ps value-added payments for the corn. For Federal tax
purposes, Ps reported the value-added payments they
received during 1994 and 1995 as proceeds from the sale
of capital assets and did not treat the amounts
received as self-employment income.
Held: During 1994 and 1995, Ps were engaged in
the business of acquiring and selling corn and corn
products for a profit. The value-added payments were
derived from Ps’ business and must be included in the
calculation of Ps’ net earnings from self-employment
for purposes of determining Ps’ liability for self-
employment tax.
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