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SEC. 32. EARNED INCOME.
* * * * * * *
(c) Definitions and Special Rules.--For purposes of
this section--
* * * * * * *
(2) Earned income.
(A) The term “earned income” means--
(i) wages, salaries, tips, and other
employee compensation, but only if such
amounts are includible in gross income for
the taxable year, plus
(ii) the amount of the taxpayer’s net
earnings from self-employment for the taxable
year (within the meaning of section 1402(a)),
but such net earnings shall be determined
with regard to the deduction allowed to the
taxpayer by section 164(f).
Petitioner correctly points out that “earned income” in
section 32 is defined in the statute (sec. 32(c)(2)(A)(ii)) to
include the concept of net earnings from self-employment, but
there is no such definition of “earned income” in section 63.
We agree with petitioner’s conclusion.
The Table Is Set; The Tax Reform Act of 1969
Section 802 of the Tax Reform Act of 1969 (TRA 1969), Pub.
L. 91-172, 83 Stat. 487, 676, significantly increased the
standard deduction available to taxpayers who did not itemize
deductions.
Section 804 of TRA 1969 (83 Stat. at 685) added section
1348, which provided a 50-percent maximum rate on earned income,
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