Section of Taxation Publications
  VOL. 54
NO. 1
FALL 2000
Contents | TTL Home

 Note: The following is an excerpt from the introduction to the article as published in The Tax Lawyer. Author citations have been omitted for brevity. Tax Section members may read the article in its entirety in Adobe Acrobat format.

S Corporation Losses May Not Be Deducted from Self-Employment Net Income: Ding v. Commissioner

Andrew Cook


In Ding v. Commissioner the Ninth Circuit held that an individual cannot take into account S corporation pass-through losses for purposes of determining self-employment tax liability. In making its determination, the court focused on the section 1402 definition of self-employment net income, as interpreted by Revenue Ruling 59-221. The Ding II decision raises serious policy questions about why S corporations are treated like partnerships in most areas of the Code, while in others they are treated like C corporations.

This Note addresses this inconsistency within the Code and discusses attempts to break down formalistic distinctions in this area. Part I of this Note discusses the facts and rationale behind the court’s decision. Part II explains why the court correctly interpreted current law. Part III argues that changes should be made in the way S corporations are treated compared to partnerships.


Published by
Section of Taxation, American Bar Association
With the Assistance of
Georgetown University Law Center


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