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subject to self-employment tax. Therefore, the Commissioner
argued, so should the insurance proceeds.
This Court rejected the Commissioner’s argument, holding
“that there must be a nexus between the income received and a
trade or business that is, or was, actually carried on”. Id. at
444. Since the insurance proceeds were received not from the
operation of the business, but rather because of the nonoperation
of the business, we held that the proceeds were not subject to
self-employment tax.
The comparable statutory terms--carrying on a trade or
business and rendering services--suggests to us that
any income must arise from some actual (whether
present, past or future) income-producing activity of
the taxpayer before such income becomes subject to
either FUTA, FICA, or self-employment taxes, as the
case may be. * * * [Id. at 446.]
From this small seed has grown a great tree of self-
employment tax jurisprudence, a tree with many branches. One
large branch of the tree is made up of cases concerning insurance
company agent and manager termination payments.
One of the principal cases addressing whether insurance
company agent termination payments are subject to self-employment
tax is Milligan v. Commissioner, 38 F.3d 1094 (9th Cir. 1994),
revg. T.C. Memo. 1992-655, in which the Court of Appeals for the
Ninth Circuit, to which the case at hand would be appealable,
reversed a decision of this Court. The taxpayer in Milligan, a
former State Farm insurance agent, received termination payments
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