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was compensated exclusively by commissions based on the business
produced by those agents. Petitioner’s relationship with the
companies was governed by the agreement, and once the agreement
was canceled, petitioner had no right to any further commissions.
He was, however, paid an amount denominated “Contract Value”
(contract value), which was based on the commissions paid him
during the 6 months immediately preceding the cancellation of the
agreement and the number of years of his service as district
manager. That amount was not subject to any change once
determined. Petitioners do not dispute that, during petitioner’s
tenure as a district manager, he was a self-employed individual
engaged in the business of managing a district for the companies.
They do argue that the contract value paid to petitioner
following cancellation of the agreement is excluded from the
computation of net earnings from self-employment since it is a
capital gain or other gain described in section 1402(a)(3)(A) or
(C).
In Schelble v. Commissioner, supra, the taxpayer was an
insurance agent (not a manager), and, on termination of his
agency agreement, he was paid “extended earnings”, which amount
was determined based on renewal commissions paid to him during
the last 6 or 12 months of his service and the number of his
years of service. Because the record showed that there was no
express agreement for the sale of any assets or any evidence of
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