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correct; petitioners must prove that respondent’s determinations
are erroneous in order to rebut the presumption and satisfy their
burden of proof. Id.; Welch v. Helvering, 290 U.S. 111, 115
(1933).
I. Trade or Business
Because only gross income derived from a trade or business
carried on by the taxpayer is taken into account in calculating
net earnings from self-employment, we first consider whether
petitioners carried on a trade or business during the years at
issue. The term “trade or business” has the same meaning for
purposes of section 1402 as it has for purposes of section 162.
Sec. 1402(c). “Trade or business” under section 162 has been
interpreted to mean an activity that is conducted “with
continuity and regularity” and with the primary purpose of making
income or a profit. Commissioner v. Groetzinger, 480 U.S. 23, 35
(1987).
Courts have sometimes struggled to differentiate a trade or
business from a passive investment. E.g., Hendrickson v.
Commissioner, T.C. Memo. 1987-566 (“It is often difficult to
distinguish a ‘trade or business’ from passive investments held
for the production of income.” (citing Higgins v. Commissioner,
312 U.S. 212, 217 (1941))). Whether a taxpayer is engaged in a
11(...continued)
L. 105-206, sec. 3001(c), 112 Stat. 685, 724.
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