118 T.C. No. 28
UNITED STATES TAX COURT
WARREN L. BAKER, JR. AND DORRIS J. BAKER, Petitioners v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 599-00. Filed May 29, 2002.
P (husband) entered into “agents agreements”
(agreement) with State Farm Insurance Cos. (State Farm)
wherein P agreed to write insurance policies
exclusively for State Farm. The agreement provided
that all property including information about policy
holders belonged to State Farm. P’s compensation was
based on a percentage of net premiums. The agreement
also contained detailed provisions for termination.
P was entitled to a termination payment based on the
percentage of policies that either (1) remained in
force after termination or (2) were in force for the 12
months preceding termination. P and State Farm did not
negotiate the terms of the agreement.
P retired after approximately 34 years of
operating as an independent agent for State Farm.
Pursuant to the termination agreement P returned
account information, computers and the like to State
Farm and the successor agent. P received a payment of
$38,622 in 1997 from State Farm pursuant to the
termination agreement.
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