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trade or business must be ascertained from a review of all the
relevant facts and circumstances. Commissioner v. Groetzinger,
supra (“in the absence of guidance, * * * We would defer * * * to
the Code’s normal focus on what we regard as a common-sense
concept of what is a trade or business”).
Neither party addressed directly whether petitioners’ rental
of their farm to the sons (rental activity), standing alone,
constituted a trade or business for purposes of the self-
employment tax. However, respondent appears to have accepted the
proposition that income generated by petitioners’ rental activity
is not subject to self-employment tax, presumably because of the
provisions of section 1402(a)(1).12 Consequently, we focus our
analysis on petitioners’ activities with respect to MCP in order
to decide whether petitioners were engaged in a trade or business
12Sec. 1402(a)(1) provides that excludable farm rental
income includes rent paid in crop shares. Sec. 1.1402(a)-4,
Income Tax Regs., provides:
Rentals paid in crop shares include income derived by
an owner or lessee of land under an agreement entered
into with another person pursuant to which such other
person undertakes to produce a crop or livestock on
such land and pursuant to which (1) the crop or
livestock, or the proceeds thereof, are to be divided
between such owner or lessee and such other person, and
(2) the share of the owner or lessee depends on the
amount of the crop or livestock produced. * * *
Presumably because the sons leased petitioners’ farm during 1994
and 1995 and paid petitioners a portion of what was produced on
the farm as rent, respondent did not determine that the income
petitioners reported as farm rental income on Form 4835 was
subject to self-employment tax.
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