-18-
Petitioners contend that the Oxyfresh payments to Prindle or
to Mr. Fox are passive income because they were a percentage of
all Oxyfresh company sales, not only sales from distributors that
he recruited. We disagree. The payments from Oxyfresh were not
passive income because Mr. Fox's activities to earn them were not
passive. Mr. Fox had to work for Oxyfresh to receive payments
from Oxyfresh. Mr. Fox owned Oxyfresh stock, but petitioners do
not contend that the payments from Oxyfresh were dividends.
Petitioners contend that the Oxyfresh payments are not self-
employment income because they would continue even after Mr. Fox
died. For reasons stated in paragraph B-2, we are not convinced
that Oxyfresh would continue to make payments after Mr. Fox died.
Petitioners rely on Gump v. United States, 86 F.3d 1126,
1128 (Fed. Cir. 1996), in which the U.S. Court of Appeals for the
Federal Circuit held that payments from Nationwide Mutual
Insurance Co.'s Agency Security Compensation Plan to a retired
independent agent who sold Nationwide policies were not subject
to self-employment tax. In Gump, the Government contended that
the payments were part of the taxpayer's compensation for selling
insurance. Id. The Court of Appeals disagreed and held that
payments were made to cancel the payor's business relationship
with the taxpayer. Id. The Court of Appeals held that the
payments to cancel the business relationship were not self-
employment income. Id. Oxyfresh did not pay Mr. Fox or Prindle
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