- 24 - required to make value-added payments as further consideration for the corn delivered by petitioners. The amount of value-added payments petitioners received from MCP was based on petitioners’ patronage; i.e., the amount of corn acquired and delivered by petitioners to MCP during the processing year. In Shumaker v. Commissioner, T.C. Memo. 1979-71, affd. on this issue and revd. on another ground 648 F.2d 1198 (9th Cir. 1981), we concluded without discussion that patronage distributions were subject to self-employment tax under sections 1401 and 1402. On appeal, the Court of Appeals for the Ninth Circuit affirmed our conclusion, holding that “patronage dividends from farmer’s cooperatives was properly subject to self-employment tax.” Shumaker v. Commissioner, 648 F.2d at 1200. Because the value-added payments were directly related to the volume of corn acquired and delivered by petitioners to MCP and were paid in consideration for petitioners’ patronage, the value-added payments had a direct nexus to petitioners’ trade or business and, consequently, were derived from that trade or business. Therefore, unless the exclusion under either section 1402(a)(3) or (2) applies to the value-added payments, those payments must be included in calculating petitioners’ net earnings from self-employment.Page: Previous 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 Next
Last modified: May 25, 2011