- 32 -
Reasoning that the payments under the Settlement Agreement had
the same character as the renewal commissions, we concluded that
the payments were subject to self-employment tax.
Like the payments received by the taxpayers in the Becker
and Erickson cases, the payments received by Mr. Lencke in lieu
of renewal commissions retained the character of the renewal
commissions they replaced. Petitioners cite Gump v. United
States, 86 F.3d 1126 (Fed. Cir. 1996), and Milligan v.
Commissioner, 38 F.3d 1094 (9th Cir. 1994), revg. T.C. Memo.
1992-655 to support their position that the payments received by
Mr. Lencke in lieu of renewal commissions were analogous to
"termination payments" and therefore not subject to self-
employment tax. However, the payments in the Gump and Milligan
cases were not payments made in lieu of renewal commissions. The
right to the payments in those cases arose from the cancellation
of the insurance agents' business arrangements. They were
payments specifically designated as "termination payments" or
"extended earnings", and, under certain circumstances, the agents
could have lost their right to receive the payments.8 Milligan
8 In Milligan v. Commissioner, 38 F.3d 1094, 1096-1097 (9th
Cir. 1994), revg. T.C. Memo. 1992-655, the agent's right to
receive termination payments would have been canceled if all of
his former customers had canceled their non-life insurance
policies during the first post-termination year. In Gump v.
United States, 86 F.3d 1126, 1128 (Fed. Cir. 1996), the agent
would not have received his extended earnings if he had attempted
to induce his agency's policyholders to lapse, cancel, or replace
their insurance contracts.
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