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Delgado v. Commissioner (T.C. Memo. 2021-84)

On July 7, 2021, the Tax Court issued a Memorandum Opinion in the case of Delgado v. Commissioner (T.C. Memo. 2021-84). The primary issue presented in Delgado was whether the petitioner’s frivolous argument that he did not receive taxable income in 2017 because he was not engaged in a “trade or business” as defined by IRC § 7701(a)(26) held any water…

Quick Work of the Frivolousness

Compensation for services is included in gross income. IRC § 61(a)(1). Petitioner argues that the payments he received as an independent contractor were not taxable to him because he did not participate in a “trade or business” as defined in IRC § 7701(a)(26). Specifically, petitioner contends that a person is only in a “trade or business” if he or she performs “the functions of a public office” and that earnings received from private companies are not taxable income.  Not unsurprisingly, a similar argument was rejected the previous month, in Muhammad v. Commissioner (T.C. Memo. 2021-77).

IRC § 7701(a)(26) provides that “[t]he term ‘trade or business’ includes the performance of the functions of a public office.” However, IRC § 7701(c) provides that the term “includes” is not to be interpreted to “exclude other things otherwise within the meaning of the term defined.” We have previously held arguments seeking to convert “includes” to “includes only” to be frivolous. See, e.g., Wnuck v. Commissioner, 136 T.C. 498, 506 (2011); Waltner v. Commissioner, T.C. Memo. 2014-35, at *50, aff’d, 659 F. App’x 440 (9th Cir. 2016).  Moreover, petitioner’s overall theory that only those performing “the functions of a public office” need to pay Federal income tax has been consistently rejected as a “common, frivolous, tax-protestor argument of no merit.” Worsham v. Commissioner, T.C. Memo. 2012-219, *7 (quoting Hamilton v. Commissioner, T.C. Memo. 2009-271, *2), aff’d, 531 F. App’x 310 (4th Cir. 2013).

Self-Employment Income

IRC § 1401(a) imposes, in addition to other taxes, a tax “on the self-employment income of every individual.” Self-employment income generally consists of the gross income derived by an individual from any trade or business carried on by such individual, less the allowable deductions attributable to such trade or business, during any taxable year. IRC § 1402(b). The income petitioner received as an independent contractor falls within the definition of “self-employment income.”

(T.C. Memo. 2021-84) Delgado v. Commissioner

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