- 23 -
The nonsponsorship and noncompetition clause was part of a
termination agreement entered into between petitioner and
Landmark. Such a one-time agreement is clearly not the sort of
frequent and continuous activity contemplated by the regulations.
Rather, it is a single, isolated event that occurred as a result
of the unique relationship between petitioner and Landmark.
Our conclusion is consistent with analogous cases involving
self-employment taxes. In Newberry v. Commissioner, 76 T.C. 441,
444 (1981), the issue was whether the proceeds from business
interruption insurance that the taxpayer received after his store
was destroyed by fire constituted “gross income derived by an
individual from any trade or business carried on by such
individual” pursuant to section 1402(a). We held that the quoted
language of section 1402(a) required a causal nexus between the
income and actual business activity and that such a requirement
had not been met.6 The statutory language in section 1402(a) is
quite similar to the definition of unrelated business income in
section 512(a),7 and we believe that the rationale in Newberry v.
Commissioner, supra, is equally applicable to the instant case.8
6See also Milligan v. Commissioner, 38 F.3d 1094 (9th Cir.
1994), revg. T.C. Memo. 1992-655.
7Sec. 512(a) defines “unrelated business income” as “gross
income derived by any organization from any unrelated trade or
business * * * regularly carried on by it”.
8See also Barrett v. Commissioner, 58 T.C. 284, 289 (1972),
wherein this Court noted: “Both parties agree that
(continued...)
Page: Previous 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 NextLast modified: May 25, 2011