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In applying the statutory definition of self-employment
income, we must decide whether the income from the termination
payments satisfies three requirements: that it was (1) derived,
(2) from a trade or business, (3) carried on by petitioner.
Here, as in Milligan v. Commissioner, supra, petitioner agrees
that he formerly carried on a trade or business as a State Farm
insurance agent. Thus, the narrow question presented is whether
the termination payments were "derived", pursuant to the terms
and conditions of the Agreement, from the carrying on of
petitioner's previous work as a State Farm insurance agent.
This Court found in Milligan v. Commissioner, T.C. Memo.
1992-655, that the termination payments were the equivalent of
deferred compensation which a State Farm agent, active or
retired, would receive from policies sold in prior years. On
that basis, we held that the payments were "derived" from self-
employment even though they were received in years subsequent to
the business activity which generated them. In other words, we
found that there was a sufficient nexus between the income
received and Mr. Milligan's trade or business to render the
termination payments self-employment income. We stated that
termination payments were analogous to the renewal commission
payments in Becker v. Tomlinson, 9 AFTR 2d 1408, 62-1 USTC par.
3(...continued)
business." We decline to do so. We will continue to apply the
"nexus" test of Newberry v. Commissioner, 76 T.C. 441 (1981).
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