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HALPERN, J., dissenting: The majority holds that certain
termination payments received by petitioner after his retirement
as an independent insurance agent are not subject to self-
employment tax pursuant to sections 1401 and 1402 because such
payments were not “‘derived’ from the carrying on of petitioner’s
insurance business”. Majority op. p. 17. The majority is
persuaded by the reasoning of the Court of Appeals for the Ninth
Circuit (the Ninth Circuit) set forth in Milligan v.
Commissioner, 38 F.3d 1094 (9th Cir. 1994), revg. T.C. Memo.
1992-655. In Milligan, the Ninth Circuit recognized that, to be
taxable as self-employment income under the Self-Employment
Contributions Act of 1954 (SECA), sections 1401-1403, an
individual’s income must be (1) derived (2) from a trade or
business (3) carried on by that individual. Id. at 1097. In
Milligan, the taxpayer disputed only whether the termination
payments there in question (which the majority implies were
“indistinguishable” from the payments here in question) were
“derived” from the trade or business carried on by him. Relying
on our opinion in Newberry v. Commissioner, 76 T.C. 441, 444
(1981), the Ninth Circuit stated: “The term ‘derive’ requires ‘a
nexus between the income received and a trade or business that
is, or was, actually carried on.’” Milligan v. Commissioner,
supra at 1098. The Ninth Circuit continued:
By nexus, we mean that the "trade or business activity
by the taxpayer gives rise to the income...." Id.
[Newberry v. Commissioner, supra] (emphasis added).
The income is sufficiently related to the taxpayer's
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