Opinion ID: 771596
Heading Depth: 2
Heading Rank: 1

Heading: i.r.c. 1402

Text: 2 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 exclusion for rents that are 3 derived under an arrangement, between the owner or tenant and another individual, which provides that such other individual shall produce agricultural or horticultural commodities . . . on such land, and that there shall be material participation by the owner or tenant . . . in the production or the management of the production of such agricultural or horticultural commodities, and . . . there is material participation by the owner or tenant . . . with respect to any such agricultural or horticultural commodity[.] 4 Rents falling within 1402(a)(1)'s exclusion are characterized as includible farm rental income, and considered earnings from self-employment.