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because Mr. Farnsworth was not an “insurance salesman”, and
because the payments were made in 1995, before the effective date
of the statute. However, the legislative history of section
1402(k) makes it clear that the provision was intended to codify
existing law.5
Factually, the case at hand is like Schelble, and unlike
Jackson, Gump, and Milligan, because the amount of Mr.
Farnsworth’s termination payments depended on the length of his
relationship with Farmers. Mr. Farnsworth’s “contract value”
referred to in the DMAA was based upon a schedule that took into
account the number of years of service completed by the district
manager. This was more than a one-step eligibility requirement.
The longer the taxpayer’s tenure as district manager, the higher
the percentage of the taxpayer’s final 6 months’ earnings that
was used to compute “contract value”. The amount varied between
three times the last 6 months’ service commission overwrite for a
district manager with 5 years of service to seven times the last
6 months’ service commission overwrite for a manager who had, as
5After citing Jackson v. Commissioner, 108 T.C. 130 (1997),
Gump v. United States, 86 F.3d 1126 (Fed. Cir. 1996), and
Milligan v. Commissioner, 38 F.3d 1094 (9th Cir. 1994), revg.
T.C. Memo. 1992-655, the Conference Committee report states:
“The House bill codifies case law by providing that net earnings
from self-employment do not include any amount received during
the taxable year from an insurance company on account of services
performed by such individual as an insurance salesman for such
company”. H. Conf. Rept. 105-220 at 458 (1997), 1997-4 C.B.
(Vol. 2) 1457, 1927-1929.
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