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Nonetheless, in order to perform the duties of a district manager
effectively, it was necessary for petitioner to incur these
expenses. Petitioner required the assistance of a part-time
secretary to keep up with the paperwork entailed in tracking and
reporting the sales of the agents he supervised. Likewise, he
needed to maintain communications with his agents through
telephoning, faxing, and traveling extensively. He required a
place to store materials because policy forms and the like for
all his agents were delivered to him quarterly. Petitioner
believed that the incentive awards and entertainment that he
provided for his agents at his own expense contributed
significantly to the morale necessary to maintain a high level of
sales in his district. During certain months, petitioner showed
a loss from his activities as a district manager; i.e., his
expenses exceeded his income. However, petitioner ended every
year with a profit.
Petitioner executed a “Standard Employment Contract”
(Contract) with Combined. The Contract required petitioner to
devote all of his working time to advancing Combined’s business
interests. Further, the Contract prevented petitioner from
representing any other insurance company. The Contract also
required petitioner to abide by the rules and regulations issued
by Combined with respect to the conduct of, and selling methods
to be used by, Combined’s field personnel and to abide by the
directions of Combined’s authorized personnel. The Contract
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