Gerald L. and Erma L. Dunnegan - Page 12

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          Mr. Dunnegan or Mrs. Dunnegan for purposes of self-employment tax           
          under section 1401.                                                         
               Petitioners attributed 50 percent of the profit and loss               
          from the Schedules C for the fireworks businesses located in                
          Moriarty, Dennings, and Kansas City to Mrs. Dunnegan in 1993.               
          Respondent determined that 100 percent of the net profits and               
          losses from the Schedules C for the fireworks businesses was                
          attributable to Mr. Dunnegan for self-employment tax purposes.              
          Respondent argues that there is no evidence that Mrs. Dunnegan              
          was involved in the management of the businesses or had any                 
          significant responsibility for the income-generating activities             
          of the businesses.                                                          
               Section 1401(a) imposes a tax on an individual’s self-                 
          employment income.  See also sec. 1402(b).  Net earnings from               
          self-employment is the gross income derived by an individual from           
          a trade or business carried on by that individual, less certain             
          deductions.  See O’Rourke v. Commissioner, T.C. Memo. 1993-603,             
          affd. without published opinion 60 F.3d 834 (9th Cir. 1995).  We            
          have previously stated:                                                     
               With respect to individuals who are married, only the                  
               spouse carrying on the trade or business will be                       
               subject to the self-employment taxes.  The question of                 
               which spouse carries on the trade or business is a                     
               question of fact to be determined on a case-by-case                    
               basis.  * * *                                                          

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