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Insurance billing office. Farmers Insurance then credited the
Edwards agency with the commissions from the premium renewals and
reported these credits every month in a “folio”.
On petitioners’ 2003 Form 1040, U.S. Individual Income Tax
Return, filed jointly in April 2004, gross income and expenses
from the Edwards agency were listed on a Schedule C, Profit or
Loss From Business. Mrs. Edwards was listed as the proprietor of
the Edwards agency. Mr. Edwards also asserted that he materially
participated in the operation of the Edwards agency by checking
the “Yes” box in line G of Schedule C, and he listed his
occupation on page 2 of the return as “self-employed.”
Respondent issued a notice of deficiency on September 19,
2005, determining that the amounts petitioners received from the
Edwards agency in 2003 constituted income from Mr. Edwards’s
self-employment within the meaning of section 1401 and,
therefore, were subject to self-employment tax.
OPINION
Section 1401 imposes a tax on the self-employment income of
individuals. Respondent determined that the net profit Mr.
Edwards received from the operation of the Edwards agency
constituted self-employment income from both past and present
business operations, and, consequently, petitioners were liable
for self-employment tax. We need not decide whether the burden
of proof shifts to respondent under section 7491(a) because we
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Last modified: March 27, 2008