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deduction to the extent his contributions were from investment
income. This was because the investment income was not derived
from personal services. In so ruling, we quoted the legislative
history of section 401(c), which states: “Since the objective of
* * * [a qualified plan for the self-employed] is to provide
retirement benefits based on personal services, inactive owners
who derive their income entirely from investments would not be
allowed to participate.” S. Rept. 992, 87th Cong., 1st Sess. 12
(1961), 1962-3 C.B. 303, 314; see also Frick v. Commissioner,
T.C. Memo. 1985-542, affd. without published opinion 808 F.2d 837
(7th Cir. 1986); Frick v. Commissioner, T.C. Memo. 1989-86, affd.
without published opinion 916 F.2d 715 (7th Cir. 1990).
In the case at hand, petitioner applied to become a State
Farm trainee agent in fall 1976 or January 1977. However,
petitioner never performed any services for State Farm, either as
employee or as independent contractor. After 1977, she never
worked in the insurance industry, although from time to time
thereafter she worked in various selling jobs, sometimes as
employee and sometimes as independent contractor. As in the
Kramer and Frick cases, the income paid by State Farm to
petitioner in the case at hand cannot be earned income because it
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