- 12 -
did not depend upon the level of Milligan's prior
business activity because the Termination Payments were
subject to two adjustments unrelated to any business
activity on Milligan's part for State Farm. The State
Farm companies adjusted the Termination Payments to
reflect the amount of income received on Milligan's
book of business during the first post-termination
year, and the number of his personally-produced
policies cancelled during that year. If all of
Milligan's customers had cancelled their State Farm
non-life policies during the first post-termination
year, then Milligan would have received nothing. The
adjusted payment amount depended not upon Milligan's
past business activity, but upon the successor agent's
future business efforts to retain Milligan's customers
and to generate service compensation for State Farm.
* * *
Milligan v. Commisisoner, supra at 1099. Petitioner's extended
earnings were based on renewal service fees paid to him during
the final months preceding the Agreement's termination. No
adjustment was made, as in Milligan, to reflect income or
cancellations during any post-termination year.
In that respect, unlike the situation in Milligan v.
Commissioner, supra, the extended earnings received by petitioner
were not paid as a consequence of some factor unrelated to
petitioner's prior business activity as an insurance salesman.
The extended earnings depended upon the amount of renewal
commissions earned by petitioner in the last months prior to
termination, the length of petitioner's service, and the level of
petitioner's prior business activity. We find that there is a
"nexus between the income received and a trade or business that
is, or was, actually carried on", within the meaning of Newberry
v. Commissioner, 76 T.C. at 444. Thus, the extended earnings
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 Next
Last modified: May 25, 2011