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petitioners earned farming income as sole proprietors or
partners. Thus, their income is subject to self-employment tax.
See, e.g, Pelham v. Commissioner, T.C. Memo. 2001-173; Whitehead
v. Commissioner, T.C. Memo. 1991-455, affd. without published
opinion 17 F.3d 398 (9th Cir. 1994). Petitioners did not provide
any evidence that they were entitled to nor did they attempt to
claim any further deductions arising from their farming
activities.
V. Unreported Capital Gain
Respondent determined that petitioners are liable for tax on
an unreported capital gain for 2001 from the April 18, 2001, sale
of a U.S. Treasury note. Gross income includes any gain on
property. Sec. 61(a)(3). The amount of any gain on property is
the excess of the amount realized over the adjusted basis of the
property. See sec. 1001(a). Generally, the adjusted basis for
determining gain or loss from the sale or disposition of property
is the cost of such property. Secs. 1011(a), 1012. Where
property is acquired from a decedent, the basis is the fair
market value of the property at the date of death, unless the
alternate valuation date is elected. Sec. 1014. A taxpayer must
establish the basis of the property for purposes of determining
the amount of gain or loss the taxpayer must recognize. “Proof
of basis is a specific fact which the taxpayer has the burden of
proving.” O’Neill v. Commissioner, 271 F.2d 44, 50 (9th Cir.
1959), affg. T.C. Memo. 1957-193.
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