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Petitioners filed their 1995, 1996, and 1997 Forms 1040,
U.S. Individual Income Tax Return, within the time prescribed by
law. On those returns, petitioners claimed income and expenses
relating to Best Buy Stoves, the Schedule C residential heating
equipment sales business of Gary G. Gage (Mr. Gage). Petitioners
never reported or paid any self-employment tax on the business’s
1995 through 1997 net income and did not attach to any of their
returns the applicable form for self-employment tax, Schedule SE,
Self-Employment Tax. Petitioners never received an exemption
letter from the Internal Revenue Service providing that they were
exempt from self-employment taxes for 1995 through 1997.
OPINION
1. Self-Employment Tax
Self-employment income of every individual is subject to
self-employment tax under section 1401(a). The amount of this
tax is based upon a percentage of the self-employment income
earned by the individual. Section 1402(g)(1) grants an exemption
from self-employment tax to members of certain religious faiths.
This exemption requires the approval of the Commissioner of
Social Security. Section 1402(e)(1) grants an exemption from
self-employment tax to ministers of a church, members of
religious orders, or Christian Science Practitioners. This
exemption requires the approval of either the Commissioner of
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