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While serving as an agent for State Farm, petitioner's
duties included soliciting applications for insurance, collecting
payments, and generally assisting State Farm policyholders. His
compensation for his State Farm duties consisted of commissions
on new policies and renewals on existing policies.
From April 15, 1954, to May 31, 1959, and from January 1,
1972, until his retirement on December 31, 1987, petitioner
served as an agent of State Farm under a series of three separate
State Farm Agent's Agreements. During these periods of time both
petitioner and State Farm considered their association to be an
independent contractor relationship. From June 1, 1959, to
December 31, 1971, petitioner served State Farm as District
Agency Manager, and he operated under a District Agency Manager
Agreement. During that period both he and State Farm considered
their relationship to be that of an employer and an employee.
Petitioner was 63 years of age when he retired. Being an
independent contractor operating pursuant to the provisions of a
previously executed State Farm Agent's Agreement, Form AA3 (the
Agreement), petitioner closed his office on December 31, 1987,
and did not thereafter engage in further insurance business of
any kind. At that time his agency relationship with State Farm
ended and he became eligible for "Termination Payments" under
Section IV of the Agreement. In 1990 and 1991 petitioner
received termination payments from State Farm of $21,885 and
$21,837, respectively. On his Federal income tax returns for
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Last modified: May 25, 2011