- 9 -
9446 (S.D. Fla. 1962), because they constituted the payment of
previously earned commissions, similar to the deferred
commissions that an active insurance agent would receive.
The Court of Appeals for the Ninth Circuit reversed our
Milligan decision. In doing so, it acknowledged that in order
for Mr. Milligan to receive termination payments, he had to have
worked for State Farm as an independent contractor for 2 years or
more. Milligan v. Commissioner, 38 F.3d at 1098. But the Court
of Appeals stated that this fact by itself did not create a close
enough nexus to establish that the termination payments were
"derived" from Mr. Milligan's prior business activity within the
meaning of the self-employment tax. The Court of Appeals
concluded that Mr. Milligan had already been fully compensated
for his services and that his business activity was not the
"source" of the termination payments. Id. at 1099. It stated
that the payments did not represent deferred compensation of
previously earned commissions because none of Mr. Milligan's
earnings were deferred; i.e., he had no vested right to payment
of an identifiable amount of money. Nor were they renewal
commissions or retirement income tied to Mr. Milligan's years of
service and overall earnings. The Court of Appeals stated that
"To be taxable as self-employment income, earnings must be tied
to the quantity or quality of the taxpayer's prior labor, rather
than the mere fact that the taxpayer worked or works for the
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Next
Last modified: May 25, 2011