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III. Exclusions Under Section 1402
A. Introduction
Section 1402 contains several provisions which exclude
specified types of income from the calculation of net earnings
from self-employment. Petitioners contend that the value-added
payments are excludable under either section 1402(a)(3) or (2).
B. Section 1402(a)(3)
Section 1402(a)(3) excludes from the calculation of net
earnings from self-employment any gain or loss (1) from the sale
or exchange of a capital asset, or (2) from the sale, exchange,
or other disposition of property if the property is neither stock
in trade or other property of a kind normally includable in
inventory if on hand at the close of the taxable year nor
property held primarily for sale to customers in the ordinary
course of the taxpayer’s trade or business.
Although their argument is not entirely clear, petitioners
seem to contend that, because they acquired their MCP stock for
investment purposes, the corn they acquired during 1994 and 1995
and delivered to MCP for processing, marketing, and sale was a
capital asset. Petitioners’ argument is confusing and erroneous,
and we reject it.
Petitioners did not sell their MCP stock. They sold option
pool corn acquired from MCP. Petitioners’ motivation in
acquiring their MCP stock has no bearing on whether the option
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