Everett J. Diers - Page 11

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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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