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independent contractor, in various selling jobs in, among other
things, the financial products, mortgage brokerage, and real
estate businesses.
In fall 1976 or January 1977, petitioner applied to become a
State Farm trainee agent. As part of her job application,
petitioner had a series of interviews and took a test with State
Farm. Petitioner was never hired by State Farm, nor did she ever
provide services for State Farm.
In 1988, petitioner applied to become a class member of the
State Farm class action lawsuit and thereafter became a class
member. On March 6, 1992, petitioner executed a settlement
agreement and general release (settlement agreement), regarding
her claim in the State Farm class action lawsuit. In the
settlement agreement, petitioner and State Farm characterized the
settlement as “the compromise of a claim for agent earnings”; by
entering into the settlement agreement, petitioner waived “any
and all right she might have * * * respecting instatement”.
Petitioner received a $223,935 check from the law firm of
Saperstein, Mayeda, Larkin, and Goldstein as the net proceeds of
settlement of her claim in the State Farm class action lawsuit.
Petitioner has stipulated that she received $283,543 as the gross
proceeds of the settlement (not reduced by attorney’s fees and
costs) during the 1992 tax year. Of that amount, State Farm
reported $283,178 on Form 1099-MISC and the remaining $425 on
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Last modified: May 25, 2011