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that Mr. Farnsworth worked as a district manager, Farmers
maintained standard accounting practices nationwide, under which
it did not report any “retention amounts” as income to its
district managers.
During that same time, Mr. Farnsworth did not treat the
retention amounts as income and did not pay income taxes on the
retention amounts.
Mr. Farnsworth and Gloria Farnsworth were divorced on
November 8, 1988, pursuant to a marital settlement agreement
filed in the California Superior Court. Gloria Farnsworth is not
a party to this proceeding. Under the terms of the marital
settlement agreement, Mr. Farnsworth assigned to Gloria
Farnsworth 32.91 percent of his right to contract value under the
DMAA.
In July 1989, the Farmers Insurance Group Federal Credit
Union approved a loan to Mr. Farnsworth of $25,001 secured by an
assignment of Mr. Farnsworth’s “contract value” in the DMAA. In
May 1991, Mr. Farnsworth agreed to guarantee a loan by Farmers to
Fred Fourby, an agent of the company, secured by Mr. Farnsworth’s
right to “contract value” upon termination of the DMAA. Mr.
Farnsworth retired from Farmers on January 31, 1995. At Mr.
Farnsworth’s retirement, his “contract value” under the DMAA was
$761,740. Farmers deducted from the full “contract value” of
$761,740 (1) the outstanding Credit Union loan balance of
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Last modified: May 25, 2011