Section 404.1081 - General rules for figuring net earnings from self-employment(a)Determining net earnings.(1) In determining your gross income and the deductions attributable to your trade or business for the purpose of determining your net earnings from self-employment, the provisions that apply to the taxes imposed by sections 1 and 3 of the Code are used.(2) If you use the accrual method of accounting to figure your taxable income from a trade or business, you must use the same method in determining your net earnings from self-employment.(3) If you are engaged in a trade or business of selling property on the installment plan and elect, under the provisions of section 453 of the Code, to use the installment method of accounting in figuring your income, you must use the installment method in determining your net earnings from self-employment.(4) Any income which can be excluded from gross income under any provision of subtitle A of the Code cannot be counted in determining your net earnings from self-employment, unless- (i) You are a resident of Puerto Rico (see § 404.1089 );(ii) You are a minister or member of a religious order (see § 404.1091 );(iii) You are a United States citizen or resident engaged in a trade or business outside the United States (see § 404.1092 ); or(iv) You are a citizen of, or have income from sources within, certain possessions of the United States (see § 404.1093 ).(b)Trade or business carried on. You must carry on the trade or business either personally or through agents or employees. Income from a trade or business carried on by an estate or trust is not included in determining the net earnings from self-employment of the individual beneficiaries of the estate or trust.(c)Aggregate net earnings. If you are engaged in more than one trade or business, your net earnings from self-employment consist of the total of the net income and losses of all the trades or businesses you carry on. A loss in one trade or business you carry on offsets the income from another trade or business.(d)Partnerships. When you have net earnings from self-employment from a partnership as described in § 404.1080 (a) and (b) , those net earnings are combined with your other net earnings from self-employment in determining your total net earnings from self-employment for the taxable year.(e)Different taxable years. If you are a partner and your taxable year is different from that of the partnership, you must include, in figuring your net earnings from self-employment, your distributive share of the income or loss of the partnership for its taxable year ending with or within your taxable year. For the special rule in case of the termination of a partner's taxable year as a result of death, see § 404.1087 .(f)Meaning of partnerships. A partnership for social security purposes is one that is recognized as a partnership for income tax purposes. For income tax purposes, the term partnership includes not only a partnership as known under common law, but also a syndicate, group, pool, joint venture, or other unincorporated organization that carries on any trade or business, financial operation, or venture, and which is not a trust, estate, or a corporation.(g)Proprietorship taxed as domestic corporation. If you are a proprietor of an unincorporated business enterprise and have elected to be taxed as a domestic corporation, you must figure your net earnings from self-employment without regard to the election you have made.45 FR 20075, Mar. 27, 1980, as amended at 50 FR 36574, Sept. 9, 1985