Richard J. and Phyllis Bot - Page 25




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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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