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maintain that once Fultz Farms was incorporated, they no longer
had the assets and ability needed to grow the corn required by
Mr. Fultz’s equity participation in MCP. Petitioners represent
that Fultz Farms assumed the obligation to produce the corn for
MCP pursuant to the lease, and the payments they personally
received from Fultz Farms were akin to the rent on the farm real
estate paid to them by Fultz Farms. Accordingly, petitioners
argue they were not subject to self-employment tax. See McNamara
v. Commissioner, 236 F.3d 410 (8th Cir. 2000), revg. T.C. Memo.
1999-333.
This dispute is simply stated as whether the lease
arrangement with Fultz Farms precludes the inclusion of the MCP
value-added payments in Mr. Fultz’s self-employment income.
There are several aspects of the UMAs with MCP and the facts
regarding the MCP payments that present impediments to
petitioners’ position.
To purchase units in MCP, the purchaser was required to own
stock in MCP. Mr. Fultz owned the MCP stock; Fultz Farms did
not. Mr. Fultz entered into the UMAs with MCP which appointed
MCP as his agent, and he agreed to deliver the requisite
quantities of corn to MCP each year. Fultz Farms was not a party
to any agreement with MCP. In his agreement with MCP, Mr. Fultz
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