Current as of May 31, 1999

SECTION 1.1402(a)-1. DEFINITION OF NET EARNINGS FROM SELF-EMPLOYMENT.

(a) Subject to the special rules set forth in Sections 1.1402(a)-3 to
1.1402(a)-17, inclusive, and to the exclusions set forth in Sections
1.1402(c)-2 to 1.1402(c)-7, inclusive, the term "net earnings from
self-employment" means:

(1) The gross income derived by an individual from any trade or
business carried on by such individual, less the deductions allowed
by chapter 1 of the Code which are attributable to such trade or
business, plus

(2) His distributive share (whether or not distributed), as
determined under section 704, of the income (or minus the loss),
described in section 702(a)(9) and as computed under section 703,
from any trade or business carried on by any partnership of which he
is a member.

(b) Gross income derived by an individual from a trade or business
includes payments received by him from a partnership of which he is a
member for services rendered to the partnership or for the use of capital
by the partnership, to the extent the payments are determined without
regard to the income of the partnership. However, such payments received
from a partnership not engaged in a trade or business within the meaning
of section 1402(c) and Section 1.1402(c)-1 do not constitute gross income
derived by an individual from a trade or business. See section 707(c) and
the regulations thereunder, relating to guaranteed payments to a member of
a partnership for services or the use of capital. See also section 706(a)
and the regulations thereunder, relating to the taxable year of the
partner in which such guaranteed payments are to be included in computing
taxable income.

(c) Gross income derived by an individual from a trade or business
includes gross income received (in the case of an individual reporting
income on the cash receipts and disbursements method) or accrued (in the
case of an individual reporting income on the accrual method) in the
taxable year from a trade or business even though such income may be
attributable in whole or in part to services rendered or other acts
performed in a prior taxable year as to which the individual was not
subject to the tax on self-employment income.

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