McNamara v. Commissioner

HEANEY, Circuit Judge.

These cases are appeals from Tax Court rulings that cash rental income received by taxpayers was includible farm income and therefore constituted earnings from self-employment under I.R.C. § 1402(a)(1). We reverse and remand.

I. BACKGROUND

A. I.R.C. § 1402

In order to fund Social Security benefits for the self-employed, the Internal Revenue Code taxes self-employment income. Generally, taxable self-employment income excludes sources that do not depend on an individual’s labor, including rentals from real estate. Section 1402(a)(1), however, creates an exception to that…