are considered often plame and income the main issue is whether or not merely receiving money from the government for rolling land in the c r p constitutes legally sufficient regular and continuous participation to be a trade or business and whether the rent payments that mr morehouse receive from the c r p are eligible for the rentals from real estate exclusion of the top employment income doesn't he the application form represent that he is a former and shouldn't he be held to that well there two answers to that question or the first answer that you look at the realities of the situation and not simply the words that are used and the second and so he can just put false statements on the form when it's not statement that's the second part of my answer  that there is actually a landowner exemption on the c r p which allows somebody who owns farm land that was previously being farmed to enroll in the c r p and that leaves the legal definition for participation in the c r p so he's filling out the preprinted form of the government gives him he is complying with the requirements of the g o p there's no question that he's qualified to participate in the c r p and so the mere fact that the former actively engaged in farming that actually references a piece of the statute that that but again you look at the economics reality of the situation in the house and the i r s is arguing strenuously that just because it's called rent doesn't make it rent will the same applies to the farmer issue as well exemption from social security income where if you meet a certain amount of income then after that you no longer pay the social security tax on it because for one thing mr morehouse is not presently employed in a full time job in the c r p after having rented it to another farmer and kept it as an investment and that's our position and that he them traded it for tax purposes as rental from real estate there are actually three parcels that are involved two of right would would not of the tax but because of the two thousand and eight amendments the act of farmers who receive c r p would have to pay the tax unless they were who well that's our position i mean that that say yes i agree completely agree it's very similar and that there's a restriction on the taxpayer's ability to use the land you can't grow certain things on it farming can't build it he can't now decide to put a road in it and he has to get the government's permission really to do anything with the land other than what is in the contract that's a very significant restriction and the idea that that's not a rental payment really doesn't make a lot of  know if you know that iraq had previously issued some revenue rolling back and during this helps hoping period saying that if you're an active farmer then it's subject to self employment tax but they also specifically held in various points that if you're not an active farmer it's not subject to self employment tax on our position is that the small bank is really very similar to the c r p and shouldn't be distinguished from that and we agree with those earlier rulings from the i r s that those should apply here we have a non farmer who is merely participating in the c r p and that's an entirely passive participation is not a trade or business because not connected to any farming activity i'd like to reserve the rest of my time thank it please the court marion erickson for the commissioner of internal revenue i would just like to respectfully disagree with my opposing counsel that the c r p is being paid to do nothing with your land in fact there are some requirements of the c r p which i'm sure you're this question which i think is a close question to remember that self employment tax is not a punishment it's a way of funding a public good and a benefit for the individuals who are not paying into the social security system so they'll have some retirement income when the time comes question is you still have to make a trade or business vs investment activity right i say yes they have to decide and i think your client has done a flip flop over the in the ok well i think of the trade or business issue because i can see a lot of difference between the level of activity required by c r p and royally in the movie and the thirty twenty thirty forty fifty hours a week it active person investor has to make well there's no there's no to the size of growing his or her portfolio right well there no so many hours per week requirement for a god i mean this level of activity sure it's substantially i'm sure it's doing something other than you would do as a passive when work but that's true in all kinds of different activities that are not trade or business right but i understand i understand that your honor as i say i agree that it's a close question i think we need to look at the toxic or dependent which was very thorough and i think well reasoned and take into account the rules of construction that that are useful sometimes when you have a close question that self employment income should be  be really any more clear yes now and in fact interested did it knowledge that it was changing its position well in the notice i don't think so but you know what it was or any review is that we have that here i don't know what the explanation is but interestingly the first time that that the i r s took that position apparently was in the hasbrouck case we're in the tax court where we actually were on the other side of the issue and those tax payers were arguing that it shows that it is a traitor business because they wanted to deduct their expenses against their income and we initially and taken the other position that no it's not a trade or business but then after the as well so it's not just the paperwork that he's filling out it's the actual physical labor that's being done by his agent so that is significantly more active participation it's a continuous and active engagement in the activity but the other question is about the rental income is that rant even though yes the term is used in the statute rent is generally paid for the use or occupancy of the land and here the u s d a is not using or occupying the land they have a very limited right to go on the land to make sure that he is complying with the terms of the c r p but they are not using the land themselves it basically there are achieving a public good by allowing the land to not be farmed and to be not to erode i mean there are all kinds of conservation reasons for doing a stock of a farm raised there running the land so it won't be used to grow to grow  produce that the government would have to buy a surplus well that's maybe one of the reasons or that's one of the big reason was that was the biggest reason fifty years ago and i can't believe it isn't still a significant reason  they've figured out the bill that incentive so that the environmentally optimal way is what's taken out of production and all that is good but i you know whether that's i think that you have to keep in mind this court's decision and bought which although wasn't a c r p case i think it does help to look at the situation of a someone who was not a farmer who was involved in its corn processing co op and in fact their activities were very similar to the activities of mr morehouse in this case production or they didn't actually they didn't actually physically produce an acorn they were they belong to this co op and yeah so the reasoning was that these these value added payments were based out of corn you contributed to the co ops efforts right but they didn't actually physically do it they checked  box let the co op do it for them so in this case they were doing actually even less than mr morehouse was doing on his land they didn't even have a land they were just they were retired farmers they weren't active farmers and so they were basically filling out paperwork to participate in this program because it involved some actual corn they were it was considered a traitor business because of the i mean again the this court said this is unique situation and they relied on the fact that it was a co op  but i think the c r p is an analogous unique situation that is informed by now goes to the co op of corn caught situation and bought because it is the same type of level of activity that was considered a traitor business even though they were not active farmers which are there you know mr moore i was making a big distinction here between the web criticism because that really the only thing different about that decision is that mr weber was a farmer in this case mr morehouse was not a farmer i'm not sure that that's really all that relevant because the tax court held that the process of participating in the c r p was itself a trader business so  i just want to mention also that i do think it does help to look at the rules of construction that that self employment income statute should be broadly construed because it's it's a public good and that the exceptions such as the rentals are real estate exceptions should be narrowly construed and often when you have a close question those things can make a differen both categories yes your honor at the market our interpretation of the two thousand and a moment it wouldn't change anything for mr morehouse because unless that at some point he begins to receive social security or disability payments and in our position is that the fact that congress and acted a statute that didn't make one narrow exception and said this doesn't affect the treatment of anybody else is an indication that they acknowledge that course the agency could change again for your businesses or records good if i could predict what the i r s is going to do i would have a lot more money than i do now or i think they think they would stick with this given that nothing else of the financial concern about the trust fund substituted for the rent he otherwise would have received on the land if he had simply rented it to a tenant farmer and i think that's that's a little bit of a red flag that's really irrelevant is how he looked at the end come that's not the point the point is whether it needs the definition of rent  right if they're if they're sure and if there were some kind of disaster then perhaps you know he would pick up the phone and call mr morehouse and say hey there's a tornado in all your land all messed up and we have to go fix it but that and acquiring and processing and selling who are that's a trader business so that's the distinction and that's what we don't have in this case and so you know again i kind of picking from here and picking from there and not really recognizing that these things aren't consistent right but when and ended up happening was that a lot if you read the decision you can see there's a lot of letters a lot of fighting and arguing eventual and the i r s said ok fine so you're not you know it's a trade or business or whatever we don't care anymore and then the issue in the case us because it's consistent where the court is saying hey you know that's a reasonable position to take that somebody who isn't a farmer but dissipates and c r p is not involved in a trade or business because there's no nexus between those two things and i just want to point out that there is a revenue ruling sixty one seventy that we cited in our reply brief in which the i r s itself has said that an easement generates rent so this position that they're taking now that well you know you can't say that it's really an occup