- 3 -
allowable deduction for any taxable year to the lesser of $2,000
or “an amount equal to the compensation includible in the
individual’s gross income for such taxable year.” Section
219(f)(2) provides that, in the case of married individuals, “the
maximum deduction under subsection (b) shall be computed
separately for each individual”.
Section 219(f)(1) includes in compensation, earned income as
defined in section 401(c)(2), but excludes any amount received as
a pension or annuity, or as deferred compensation. Section
401(c)(2) defines earned income as “the net earnings from self-
employment (as defined in section 1402(a))”. Section 1402(a)
defines net earnings from self-employment as “the gross income
derived by an individual from any trade or business carried on by
such individual, less the deductions allowed by this subtitle
which are attributable to such trade or business”. Section
1402(a)(2) specifically defines compensation as excluding
interest and dividends. Miller v. Commissioner, 77 T.C. 97, 102
(1981).
Petitioners’ income for taxable year 2000 consisted of
interest income, ordinary dividends, taxable refunds, and pension
and annuity income, none of which is compensation as defined in
the Internal Revenue Code. Sec. 219(f)(1); sec. 1.219-1(c)(1),
Income Tax Regs. Moreover, petitioners reported a net loss from
petitioner’s sole proprietorship. Thus, there were no net
Page: Previous 1 2 3 4 5 Next
Last modified: May 25, 2011