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($10,522) are rendered nondeductible because of section 265.
Petitioner may deduct, subject to the 2-percent floor of section
67(a), the balance of $8,964 as itemized miscellaneous deductions
on Schedule A.
Self-employment Tax
Petitioners disagree with the inclusion of Church salary
payments as income subject to self-employment tax.
Section 1401(a) imposes on the self-employment income of
every individual a tax for old-age, survivors, and disability
insurance. Beginning with taxable years ending after 1967,
ordained ministers are automatically subject to the self-
employment tax with respect to services performed by them. Sec.
1402(c); see also Peverill v. Commissioner, T.C. Memo. 1986-354.
Provided certain requirements are met, section 1402(e)
exempts from the self-employment tax, the self-employment income
of certain ministers and others. Under section 1402(e)(1), a
minister must file an application for exemption “in such form and
manner, and with such official, as may be prescribed by
regulations”. The application must be filed no later than the
due date of the return (including any extension) for the second
taxable year for which the applicant had net earnings from self-
employment of at least $400, any part of which was from services
as a minister. Sec. 1402(e)(3).
Section 1.1402(e)-2A(b), Income Tax Regs., specifies that
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