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C. Self-Employment Tax
Section 1401(a) imposes a tax upon the self-employment
income of every individual. Self-employment income consists of
gross income an individual derives from carrying on any trade or
business. Sec. 1402(a) and (b); Spiegelman v. Commissioner, 102
T.C. 394, 396 (1994).
Petitioner’s self-employment tax has increased because of
the increase in income from the disallowance of claimed Schedule
C business expenses and the inclusion of unreported income.
Petitioner admits that he was self-employed and he earned his
income from his business as an insurance agent. Accordingly, we
sustain respondent’s determination that petitioner is liable for
self-employment tax.6 See Rule 142(a); Simpson v. Commissioner,
64 T.C. 974 (1975).
D. Negligence Penalty
Section 6662 provides for an accuracy-related penalty equal
to 20 percent of the underpayment if the underpayment was due to
a taxpayer’s negligence or disregard of rules or regulations.
See sec. 6662(a) and (b)(1). A taxpayer is negligent when he or
she fails “‘to do what a reasonable and ordinarily prudent person
6 We note that although full-time life insurance salesmen
are statutory employees and not liable for self-employment tax,
the record does not establish that petitioner was a full-time
salesman or a life insurance salesman in 1996. Secs. 1402(b),
(c)(2), and (d), 3121(a), (d)(3)(B).
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