No, not a law firm, but rather enough activity to create taxable self-employment income for Rollin J. Morehouse and Maureen B. Morehouse, in 140 T. C. 16, filed 6/18/13.

Rolly was a marketing man who inherited some South Dakota farmland and bought some more, but instead of growing, Rollie hired a manager to plant, till and weed ground cover as part of the US Dep’t of Agriculture’s Conservation Reserve Program (CRP). This pays landowners not to grow anything but ground cover on erosion-prone land.

Rollie claims it’s exempt as rent, but IRS says it’s self-employment income subject to FICA.

First, Rollie says he himself did nothing. IRS says that’s not disqualifying, many people carry on businesses through agents, and Judge Marvel agrees.

Next, Rollie claims CRP payments are exempt from SE. IRS says Congress only exempted CRP payments to landowners who receive Social Security, and Rollie doesn’t claim he does.

But was Rollie engaged in a trade or business? The self-employment tax provisions of Section 1401 are to be broadly construed. No question Rollie was in the CRP to make money, and he did.

Judge Marvel: “He negotiated and executed the CRP contracts and, by doing so, obligated himself, as the owner of the properties to satisfy significant contractual obligations regarding planting, maintenance, and use of the properties enrolled in the CRP and compliance with CRP requirements. Although petitioner did not actually perform the planting and maintenance work required by the CRP, he hired an individual, Mr. Redlin, to perform the work according to CRP specifications, purchased necessary materials, such as seed, and provided them to Mr. Redlin, and regularly inspected the properties to ensure that they were being maintained and used in accordance with the CRP contractual obligations. On these facts we find that petitioner engaged in the business of participating in the CRP and managing his CRP properties with the primary intent of making a profit.” 140 T. C. 16, at pp. 20-21.

That Rollie employed Redlin doesn’t mean Rollie wasn’t in business.

And even though USDA called the CRP payments “rent”, that doesn’t make it so. Rent is for use and occupancy of property; USDA could come and inspect, but they didn’t occupy or use the property. Rollie still had command and control. And just because the local USDA people called what Rollie did “farming”, that doesn’t make it so either.

Doing soil conservation is work, making a profit at it is carrying on a business, so Rollie owes SE tax, and Tax Court is unanimous, with no concurrences or dissents.