- 24 -
services for his employer. Those benefits are not derived from
any employment carried on.’” Id. at 1099 (quoting Newberry v.
Commissioner, 76 T.C. at 445).
I dissent because I am not persuaded by the reasoning of the
Ninth Circuit in Milligan v. Commissioner, supra. I do not agree
with the quantity-or-quality-of-labor test adopted by the Ninth
Circuit. I believe that the Ninth Circuit has overemphasized
parallels between the wage tax acts (the Federal Insurance
Contributions Act (FICA) and the Federal Unemployment Tax Act
(FUTA)) and SECA, forgetting that SECA, unlike FICA and FUTA,
does not impose a levy solely against labor, but, rather, imposes
a levy against certain trade or business income of an individual.
Compare sections 3121(a) and 3306(b) with section 1402(a).
Properly, the Ninth Circuit looks for a connection (nexus)
between the gross income in question and the taxpayer’s business
“activity”. Improperly, however, the Ninth Circuit uses the word
“activity” in a limited sense, a sense that encompasses only
physical or mental exertions: e.g., “Because Milligan already
had been fully compensated for his services, none of his business
activity was the ‘source’ of the Termination Payments.” Milligan
v. Commissioner, supra at 1099 (emphasis added). Such a
restrictive interpretation may be appropriate for a wage tax
analysis, in which the question is whether the payment is
remuneration for employment (labor), see sections 3121(a),
3306(b), but it is too narrow a frame of reference to determine
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