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that Seal paid Mrs. Arnold, not EAPC. We conclude that EAPC did
not control Mrs. Arnold’s performance of real estate services.5
c. Conclusion
We sustain respondent’s determination that petitioners are
subject to self-employment tax in 2001 on income from their
accounting and real estate activities.
C. Whether Petitioners’ Tax Treatment of “Leased Payroll” Is
Correct
1. Whether the $17,995 of “Leased Payroll” Income That
Petitioners Reported on Their 2001 Return Is Self-
Employment Income
Mr. Arnold testified that: (a) He personally obtained and
contracted with employees and independent contractors to provide
services to Pacific; (b) he charged Pacific 25 percent more than
the workers were paid; and (c) the 25 percent difference was
rental income to him and not subject to self-employment tax.
Generally, income from the rental of property is not self-
employment income. Sec. 1402(a)(1). Petitioners reported that
they received $17,995 of “leased payroll income” as rental
income. Petitioners contend that the $17,995 of “leased payroll
income” is not self-employment income. We disagree.
Mr. Arnold’s testimony establishes that the $17,995 that
petitioners reported as leased payroll income: (a) Was not
5 We do not consider respondent’s argument based on Mrs.
Arnold’s Web site because evidence about the Web site is not from
2001.
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