Self Employed income received by the surviving spouse - Spidell

Self Employed income received by the surviving spouse

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Message Board Self Employed income received by the surviving spouse

This topic contains 2 replies, has 2 voices, and was last updated by Lawrence Sternshein 3 weeks ago.

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  • #182855
    Lawrence Sternshein
    Participant

    Taxpayer was a Self Employed attorney and passed in early 2017.  His spouse collected $30,000 of income in 2018 from his law practice.

    The spouse is not an atty and was not involved with the business in any way.  She did not spend anytime trying to collect the outstanding invoices.

    They didn’t have a Trust, but all assets went to the surviving spouse according to the will.

    Is the income subject to Self Employment Tax?    I did read that royalties received by a surviving spouse is not subject to SE Tax and is reported on Sch E.

    If this income is reported on Sch C, can I deduct a portion of my fee paid \ received in 2018 for the 2017 Tax Returns.

    Thank you,

    Larry

  • #182880
    Mike Giangrande
    Participant

    It’s not self employment income to the surviving spouse. Here are two sources for you:

    1. Publication 559 states that “for self-employment tax purposes only, the decedent’s self-employment income will include the decedent’s distributive share of a partnership’s income or loss through the end of the month in which death occurred.”
    2. Rev. Rul. 59-162: held that commissions on insurance policies that were paid to a surviving spouse were not self-employment earnings to the surviving spouse, even though they would have been self-employment earnings had the deceased spouse received them during his life. This Revenue Ruling is very short and clearly sets forth the rule for you.
    • #182894
      Lawrence Sternshein
      Participant

      Thank you Mike!