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payor". Milligan v. Commissioner, supra at 1098. The Court of
Appeals then commented as follows:
Here, the Termination Payments were linked only to
Milligan's previous status as a two year-plus independent
contractor for State Farm. Had Milligan not worked for
State Farm, he never would have received the Termination
Payments. And, had he worked for State Farm for less than
two years, or had he not generated any policies that
produced commissions (or service compensation with respect
to State Farm Auto, see ER 54-55: section IV.A.1(a)) in the
final pre-termination year, he would have received nothing.
Without more, this link between the disputed payments
and any business activity carried on by Milligan does not
satisfy the "derive" requirement. * * * [Id.]
It was further emphasized by the Court of Appeals that Mr.
Milligan had a contingent right to receive as termination
payments an uncertain amount of money or nothing depending upon
the level of his prior business activity leading to compensation
in his final year as an agent. The payment amount depended in
part upon the level of his commissions on personally produced
policies. However, the termination payments were subject to two
adjustments. The State Farm companies adjusted the termination
payments to reflect the amount of income received on Mr.
Milligan's book of business during the first post-termination
year, and the number of his personally produced policies canceled
during that year. If all of his customers had canceled their
policies during the first post-termination year, Mr. Milligan
would have received nothing. The Court of Appeals reasoned that
in that sense the adjusted payment amount depended not upon Mr.
Milligan's past business activity, but upon a successor agent's
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