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tioners received from JJ & P Farms, Inc., pursuant to the oral
rental arrangement and the 1995 claimed rent for petitioners’
farmland and petitioners’ personal property that petitioners
received from that company pursuant to the modified oral rental
arrangement represented fair market rents.
JJ & P Farms, Inc., filed Form 1120, U.S. Corporation Income
Tax Return, for its taxable year 1995 (JJ & P Farms, Inc.’s 1995
return). In JJ & P Farms, Inc.’s 1995 return, JJ & P Farms,
Inc., reported that it paid $17,439 of compensation to Mr. Solvie
as an officer of that company and $3,410 of compensation to Ms.
Solvie as an officer. In that return, JJ & P Farms, Inc.,
reported that it paid $6,989 of salaries and wages, although it
did not identify in that return the person or persons to whom it
paid those wages. In JJ & P Farms, Inc.’s 1995 return, JJ & P
Farms, Inc., reported that it paid $142,634 in rent, although it
did not specify in that return the amount of such rent that it
paid to petitioners during its taxable year 1995.
On March 20, 1998, respondent issued a notice to petitioners
with respect to their taxable years 1993, 1994, and 1995. In
that notice, respondent determined that the 1993 claimed rent,
the 1994 claimed rent, and the 1995 total claimed rent, reduced
by the deductions attributable to such respective rents, are
subject to self-employment tax because they constitute net
earnings from self-employment under section 1402(a)(1).
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Last modified: May 25, 2011