Jackson v. Commissioner
United States Tax Court
P, a former insurance agent for State Farm Insurance Companies, received termination payments after his retirement on December 31, 1987, pursuant to the terms of an independent contractor Agent's Agreement.
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P, a former insurance agent for State Farm Insurance Companies, received termination payments after his retirement on December 31, 1987, pursuant to the terms of an independent contractor Agent's Agreement. Held, the termination payments P received were not "derived" from a trade or business carried on by him as an insurance agent during 1990 and 1991. Therefore, such payments are not subject to self-employment tax under sections 1401 and 1402, I.R.C., and P is not liable for such tax. Milligan v. Commissioner, 38 F.3d 1094 (9th Cir. 1994), revg. T.C. Memo. 1992-655, followed.
1ConcurrenceParr, J.
I would conclude that the termination payments received by petitioner are not subject to self-employment tax, because in my judgment the payments are in the nature of a buyout of petitioner’s business by State Farm. Thus, they should be treated as a sale of a capital asset and are excluded from the definition of self-employment income under section 1402(a)(3)(A). The payments are in reality either for the goodwill of petitioner’s former insurance business (his books of customer accounts) or for a covenant not to compete.
If the termination payments are for goodwill, then they are attributable…
2Cases cited12 opinions
- Nationwide Mutual Insurance v. DardenSupreme Court of the United States · 1992
- Winn-Dixie Montgomery, Inc. v. United StatesCourt of Appeals for the Fifth Circuit · 1971
- Robert E. Milligan v. Commissioner Internal Revenue ServiceCourt of Appeals for the Ninth Circuit · 1994
- Barrett v. CommissionerUnited States Tax Court · 1972
- R.E. Fraver J. Rives Manning, Jr. J.C. Faust Hubert Hampton Martin William A. Pleasant C.B. Weatherly, Jr. Lee Williams Jimmy McElreath Mike Steiner David Marion James K. Wright William A. Davenport, Jr. Max F. Roberts Ted Bright Billy Ray Staley William Samuel Kirby Herbert M. Speas, Jr. Robert L. Dobbins Linda G. Hamrick Edward L. Lowder Ron Worthington David Breeden Peggy Horney Harry Horney Robert J. Womble v. North Carolina Farm Bureau Mutual Insurance Company, R.E. Fraver Hubert Hampton Martin C.B. Weatherly, Jr. Lee Williams William A. Davenport, Jr. Max F. Roberts Ted Bright Herbert M. Speas, Jr. Robert L. Dobbins Ron Worthington, and J. Rives Manning, Jr. J.C. Faust William A. Pleasant Jimmy McElreath Mike Steiner David Marion James K. Wright Billy Ray Staley William Samuel Kirby Linda G. Hamrick Edward L. Lowder David Breeden Peggy Horney Harry Horney Robert J. Womble v. North Carolina Farm Bureau Mutual Insurance CompanyCourt of Appeals for the Fourth Circuit · 1986
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