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for each year plus additions to tax under sections 6651(f) and
6654. Petitioner timely filed his petition seeking a
redetermination.
On August 7, 2003, in the U.S. District Court for the
Southern District of Ohio, petitioner pleaded nolo contendere to
four counts under section 7203 of willfully failing to file
Federal income tax returns for 1994, 1995, 1996, and 1997.
Petitioner was sentenced to four 2-year terms of probation to be
served concurrently and ordered to pay a fine of $2,000 and
restitution of $27,475.97 in respect of his income tax
liabilities for 1994, 1995, 1996, and 1997.
OPINION
I. Unreported Income
Pursuant to section 61(a), gross income includes “all income
from whatever source derived”. Section 61(a)(1) provides that
gross income includes compensation received in exchange for
services rendered. With respect to such income it is well
settled that the person who earns income is taxed on the income.
Commissioner v. Culbertson, 337 U.S. 733, 739-740 (1949).
Generally, a sole proprietor who derives income from a trade or
business is considered to have received self-employment income.
Secs. 1.1401-1(c), 1.1402(c)-1, Income Tax Regs. Self-employed
individuals are also liable for self-employment tax pursuant to
section 1401 as part of their Federal income tax liability. See
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