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vendible business assets, we concluded that the taxpayer had
failed to prove that the extended earnings constituted gain from
the sale of any capital asset. We found that, because the
extended earnings “were tied to the quantity, quality, and
duration” of the taxpayer’s prior labor as an insurance agent,
there was a nexus between the payments and that business, and the
payments constituted net earnings from self-employment, subject
to the tax on self-employment income provided for in section
1401. The Court of Appeals for the Tenth Circuit affirmed,
recognizing that the extended payments were in consideration of
the taxpayer’s return of records and a covenant not to compete,
but emphasizing that the extended payments were “tied to the
quantity and quality of his prior services performed for [the
insurance companies in question]” and were not subject to
adjustment on account of any factor unrelated to his prior
service. Schelble v. Commissioner, 130 F.3d 1388, 1393 (10th
Cir. 1997). The Court of Appeals concluded: “Based on these
distinguishing factors, we conclude that Mr. Schelble’s payments
are sufficiently derived from his prior insurance business to
constitute self-employment income subject to self-employment tax
under 26 U.S.C. � 1401.” Id. The Court of Appeals dismissed the
taxpayer’s argument that he had sold a capital asset for the same
reason as the Tax Court; i.e., no evidence of vendible assets nor
any language referencing a contract of sale. Id. at 1394.
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