TAX COURT OPINION

Case: Robert T. & Margaret M. Fitzpatrick
Docket Number: 1075-08S
Judge: Goldberg
Opinion Type: summary
Filed: 10/19/2009
Pages: 6

bj T .C . Summary Opinion 2009-16 1 UNITED STATES TAX COUR T ROBERT T . AND MARGARET M . FITZPATRICK, Petitioners v . COMMISSIONER OF INTERNAL REVENUE, Respondent , I Docket No . 1075-08S . Filed October 19, 2009 . Robert T . Fitzpatrick, pro se . Daniel Ryan , for respondent . GOLDBERG, Special Trial Judge : This case was heard pursuant to the provisions of section 7463 of the Internal Revenue Code i n effect at the time the petition iwas filed . Pursuant to section 7463(b), . the ;decision to be entered is not reviewable by any other court, and this opinion shall not be treated as preceden t for any other case . Unless otherwise indicated, subsequen t SERVED Oct 19 2009 1-4 2 - section references are to the Internal Revenue Code in effect for the year in issue . Respondent determined a deficiency of $2,852 in petitioners' Federal income tax for 2005 . The sole issue for decision is whether Robert T . Fitzpatrick (petitioner) is subject to self-employment tax on the fee-based income that he receive d as a bail magistrate . Background Some of the facts have been stipulated and are so found . The stipulation of facts, the supplemental stipulation of facts, and the attached exhibits are incorporated herein by this reference . Petitioners resided in the Commonwealth of Massachusetts (Commonwealth) when the petition was filed . During 2005 petitioner was employed as a salaried assistant clerk magistrate for the West Roxbury District Court in Forest Hills, Massachusetts . Petitioner rightly did not pay employment taxes .on this salary income because as an employee of the Commonwealth he participated in its retirement system . At th e time of trial petitioner was eligible for maximum retirement benefits under the Commonwealth's retirement system . As an assistant clerk magistrate, petitioner had the option of also serving as a bail magistrate . Bail magistrates are authorized under Mass . Ann . Laws ch . 276, sec . 57 (Lexis Nexis 2002), and petitioner was sworn in as a bail magistrate by a A superior court judge . Petitioner worked as a bail magistrate fo r I many years, and he was compensated for his work with fee-based I income received from the public . The fee-based income was pai d to petitioner, by those being held in custody, for determining the terms of. bail . Petitioner received $40 in cash .each time . he performed this service . Petitioner did not participate in the retirement system of the Commonwealth by virtue of this position . Before 2005 petitioner reported his fee-based income o n Schedule C, Profit or Loss From Business, of his Federal income tax return and paid self-employment taxes on the net income . He stopped paying self-employment tax on this income in 2005 on the basis of a newsletter that he received from an association of clerks . The newsletter stated t1hat fee-based income received b y bail magistrates for setting bail might not be subject to self- employment tax . Discussion In order for individuals to be liable for payment of th e self-employment tax they must have "'net earnings from self- employment' , * * * [which is] the gross income derived by an individual from any trade or business carried on by such individual" . . Sec . 1402(a) . For purposes of .self-employment income, the term "trade . or business" has "the same meaning a s when used in section 162 (relating to trade or busines s I expenses )" . Sec . 1402(c) . 14 - 4 - Those who derive income from the performance of the functions of a public office are generally not subject to self- employment tax because the income is not derived from a "trade or business" . See sec . 1402(c)(1) ; Ekren v . Commissioner , T .C . Memo . 1986-509 ; see also Porter v . Commissioner , 88 T .C . 548, 561 (1987), revd . 856 F .2d 1205 (8th Cir . 1988), affd . sub nom . Adams v . Commissioner , 841 F .2d 62 (3d Cir . 1988) . However, those who perform the functions of a public office, "with respect to fees received in any period in which the functions are performed in a position compensated solely on a fee basis and in which such functions are not covered under . an agreement entered into by such State and the Commissioner of Social Security pursuant to section 218 of the Social Security Act", 42 U .S .C . sec . 418 (2006), are required to pay self-employment tax on the fee-based income received, sec . 1402(c)(1) . A public office for this purpose "includes any elective or appointive office of the United States or any possession thereof, of the District of Columbia, of a State or its political subdivisions, or a wholly-owned instrumentality of any one or more of the foregoing ." Sec . 1 .1402(c)-2(b), Income Tax Regs . The examples provided in the regulations include a judge, a justice of the peace, a county or city attorney, and a notary public . Id . Petitioner was sworn into office as a bail magistrate by a superior court judge, and his position was 14 authorized under the laws of the Commonwealth . We find that petitioner does hold a public office . It . is clear that as a bai l magistrate petitioner receive d fee-based income for performing the duties of a public . office ; however, in order for petitioner to be exempt from paying self- employment tax on this income , it is necessary that thi s position be covered by an agreement between the Commonwealth and the Social Security Adminis~Iration "pursuant to section 218 of the Social Security Act" (SSA) . Although petitioner holds two public offices, each position is treated separately .. See sec . 1 .1402(c)-3(f) (1) (i) , Income Tax (cid:127)Regs . The Commonwealth and the Social Security Administratio n I established an agreement to extend Social Security coverage t o employees of instrumentalities of the Commonwealth of Massachusetts, pursuant to SSA section 218, on August 13, 1952 . This agreement extended the insurance system established by SS A title II to services performed by individuals as employees o f specific instrumentalities of the Commonwealth . The origina l agreement has been amended 11 times . . The instrumentalities covered by the original SSA section 218 agreement and subsequent amendments include : (1) The Greenfield and Montague Transportation Area ; (2) the Massachusetts Market Authority ; ;(3) the . Mystic River Bridg e Authority ; (4) the Nashoba Associated Boards of Health ; (5) the - 6 - Massachusetts Turnpike Authority (coverage terminated by the second amendment) ; (6) the Boston Arena Authority ; (7) the Massachusetts Health and Educational Facilities Authority ; (8) the Massachusetts Board of Bar Overseers ; (9) the Springfield Parking Authority ; (10) the Pioneer Valley Transit Authority ; (11) the North East Solid Waste Committee ; (12) the Greater Lawrence Sanitary District ; (13) the Montachusett Regional Planning Board ; (14) the Southeastern Regional Planning and Economic Development District ; and (15) the Pioneer Valley Planning Commission . We find that petitioner did not work for an instrumentality of the Commonwealth that is covered under the original SSA section 218 agreement and subsequent amendments . Therefore, petitioner is required to pay self-employment tax on the fee-based income that he received as a bail magistrate . See sec . 1402 (c)(1) . To reflect the, foregoing, Decision will be entere d for respondent .