1Unless otherwise indicated, all section references are to

the Internal Revenue Code in effect for the taxable year in

issue. All Rule references are to the Tax Court Rules of

Practice and Procedure.

T.C. Memo. 1996-290

UNITED STATES TAX COURT

JAMES M. McGAFFIN III and DEBORAH McGAFFIN, Petitioners v.

COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 2490-94. Filed June 24, 1996.

James M. and Deborah McGaffin, pro sese.

Lisa K. Hartnett, for respondent.

MEMORANDUM OPINION

DEAN, Special Trial Judge: This case was heard pursuant to

the provisions of section 7443A(b) and Rules 180, 181, and 182.1

Respondent determined a deficiency in petitioners' 1991

Federal income tax in the amount of $4,531. The sole issue for
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2The parties have stipulated to the amount to which the

self-employment tax applies if petitioner is not exempt.

decision is whether petitioner James M. McGaffin, a minister, is

exempt from self-employment tax because he properly filed an

application for exemption under section 1402(e).2 

Some of the facts have been stipulated and are so found. 

The stipulation of facts and attached exhibits are incorporated

herein by reference. At the time the petition was filed in this

case, petitioners resided in Omaha, Nebraska. All references to

petitioner are to James M. McGaffin.

Background

Petitioner began practicing as a licensed minister in 1984

and was subsequently ordained in 1988. Petitioners filed a joint

individual income tax return for the year 1984 indicating their

respective occupations to be "pastor" and housewife. The return

reported self-employment income in excess of $400 some of which

was earned by petitioner through the performance of services as a

minister. There was no Form 4361, Application For Exemption From

Self-Employment Tax, for use by ministers, attached to the return

for the year 1984. Petitioners did attach to their 1984 return a

Schedule SE, Computation of Social Security Self-Employment Tax. 

On the schedule they did not check the box following line 2, Part

I, Schedule SE, to indicate earnings as a minister that were

exempt from self-employment tax. 
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3Respondent entered into evidence a certified copy of Form

4340, Certificate of Assessments and Payments, for petitioners'

Form 1040 for the year 1985. Respondent's record of assessments

and payments shows the filing date for the 1985 return to be

June 9, 1986. An addition to tax due to late filing was assessed

and paid on July 11, 1986. 

Petitioner continued to perform services as a minister in

the year 1985. Petitioners' joint individual income tax return

for the year 19853 includes a Schedule SE on which the box

following line 2, Part I, is checked, indicating that "you are

exempt from self-employment tax on your earnings as a minister

* * * because you filed Form 4361." The Schedule SE for 1985

lists only the net profit amount reported on a Schedule C and

excludes over $10,000 in payments to petitioner from Omaha

Victory Church for his services as a minister. 

In the early part of 1991, petitioners' Federal income tax

returns for tax years 1989 and 1990 came under examination by

respondent. During this examination there arose a dispute

between petitioners and respondent over whether petitioner had on

file with respondent a valid exemption Form 4361 with respect to

petitioner's earnings from his ministry.

On February 4, 1992, respondent received and filed a Form

4361 dated September 19, 1991, that petitioners had submitted. 

Petitioners insisted that they had previously attached a Form

4361 to their 1985 tax return and advised respondent that the

filing of the "new" exemption form was merely a "protective
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election". The February 1992 Form 4361 was determined to be

untimely and was disapproved by the IRS on March 23, 1992.

Eventually, petitioners' Federal income tax return for the

year 1991 also came under examination by respondent. In the year

1991, petitioner earned and reported $32,069 from Word Outreach

Center for services performed as a minister. On their joint

individual Federal income tax return for 1991, however,

petitioners did not report self-employment tax on any of the

income received in connection with petitioner's services as a

minister. Respondent searched her records and found no

application for exemption other than the Form 4361 disapproved on

March 23, 1992. Having found no approved application for

exemption from self-employment tax, respondent determined that

the entire $32,069 received by petitioner during 1991 from Word

Outreach Center is subject to self-employment tax.

Discussion 

Petitioners argue that they are exempt from self-employment

tax on petitioner's earnings as a minister. Respondent's

position is that petitioners have not timely filed for or

received an approved exemption from self-employment taxes. The

determinations of respondent are presumed to be correct, and

petitioners bear the burden of proving otherwise. Rule 142(a);

Welch v. Helvering, 290 U.S. 111, 115 (1933). 

Section 1401(a) imposes on the self-employment income of

every individual a tax for old-age, survivors and disability
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insurance. Beginning with taxable years ending after 1967,

ordained ministers are automatically subject to the selfemployment tax with respect to services performed by them. Sec.

1402(c); see Peverill v. Commissioner, T.C. Memo. 1986-354. 

Provided certain requirements are met, section 1402(e)

exempts from the self-employment tax, the self-employment income

of certain ministers and others. Under section 1402(e)(1), a

minister must file an application for exemption "in such form and

manner, and with such official, as may be prescribed by

regulations". The application must be filed no later than the

due date of the return (including any extension) for the second

taxable year for which the applicant had net earnings from selfemployment of at least $400, any part of which was from services

as a minister. Sec. 1402(e)(3).

Section 1.1402(e)-2A(b), Income Tax Regs., specifies that

the application must be made on Form 4361, in triplicate, with

the specified office of the Internal Revenue Service, within the

prescribed time limit. 

The time limitations of section 1402(e) are mandatory and

must be complied with strictly. Treadway v. Commissioner, T.C.

Memo. 1984-153; Allinson v. Commissioner, T.C. Memo. 1979-405. 

At trial petitioners testified that the appropriate Form 4361 was

timely filed by the due date of the return for the second taxable

year of petitioner's earnings from performing services as a

minister. According to petitioner, he filled out a Form 4361 on
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4Due to the late hour of preparation of the form and the

absence of a copy machine, we are informed, petitioners are

unable to produce a copy of the Form 4361 that was attached to

the return.

the evening of April 15, 1986, and the original form was attached

to and mailed with the 1985 tax return just before midnight.4

Respondent, on the other hand, introduced evidence showing that

petitioners' 1985 Federal income tax return was not filed until

June 9, 1986, incurring a late filing addition to tax that was

paid. 

While we are inclined to believe that petitioner filed a

Form 4361 with the 1985 return, we find the documentary evidence

of respondent on the date of filing of the 1985 return to be more

persuasive than petitioners' memory of the date of filing.

Petitioners have failed to carry their burden to show that a

Form 4361 was timely filed and approved. Accordingly, no portion

of the income earned by petitioner is exempt from the tax on

self-employment income, and respondent's determination is

sustained. 

 Decision will be entered

 for respondent.