7
Mr. Grigoraci’s share of the corporation’s income was $92,470.
On their joint return for 1996, the Grigoracis reported the
passthrough income from the corporation as well as Mr.
Grigoraci’s salary from the corporation. The Grigoracis did not
pay any self-employment tax in 1996.
A notice of deficiency, dated April 14, 2000, was issued by
respondent to the Grigoracis. Respondent determined therein that
the $92,470 reported by the Grigoracis as their distributive
share of Grigoraci S Corporation’s income was actually their
distributive share of GTWP’s income. Respondent determined that
the $92,470 was personal service income. Respondent also
determined that the $32,000 the Grigoracis reported as wages from
Grigoraci S Corporation was actually personal service income.
Respondent further determined that the Grigoracis owed self-
employment tax on the $124,470 ($92,470 plus $32,000) in the
amount of $15,076. Additionally, respondent determined that the
Grigoracis were liable for a negligence accuracy-related penalty
under section 6662(a) of $2,534 for their failure to treat Mr.
Grigoraci as a partner in GTWP.
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