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future business efforts to retain Mr. Milligan's customers and to
generate service compensation for State Farm. The Court
concluded that the disputed termination payments did not "derive"
from Mr. Milligan's prior service.
We have set forth at length the reasons stated by the Ninth
Circuit for reversing our Milligan opinion because we think they
are persuasive. The case now before us is identical to Milligan
in all material respects. Milligan cannot be distinguished, as
it was in Schelble v. Commissioner, T.C. Memo. 1996-269, on
appeal (10th Cir., Sept. 16, 1996), which involved "extended
earnings" under a Career Agent's Agreement with American Family
Insurance Companies, where this Court held that the taxpayer was
subject to self-employment tax. But see, Gump v. United States,
86 F.3d 1126 (Fed. Cir. 1996), holding that "extended earnings"
paid by Nationwide Mutual Insurance Company to a retired
insurance agent were not "derived" from a trade or business
carried on by him, and therefore he was not subject to self-
employment tax. The Court of Appeals for the Federal Circuit
found the Ninth Circuit's reasoning in Milligan persuasive, and
stated that "we do not see any meaningful differences between
Milligan and Gump that would counsel a different result". Id. at
1129.
We have given further thought to our conclusion in Milligan
v. Commissioner, T.C. Memo. 1992-655, that the termination
payments were the equivalent of deferred compensation.
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