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transaction at issue a sale of property by Mr. Farnsworth.”
Farnsworth v. Commissioner, supra; see also Baker v.
Commissioner, 118 T.C. 452, 461-465 (2002) (termination payment
made to insurance agent not received for sale of capital assets).
The payments by the companies of contract value are subject
to the tax on self-employment income since they constitute net
earnings from self-employment. We reach that conclusion because
contract value was determined based on the quantity (length of
service) and quality (final 6 months’ earnings without reduction
for posttermination events) of the services rendered by
petitioner to the companies. That establishes a nexus between
the contract value and petitioner’s business of being a district
manager. Petitioners argue that the agreement created a
franchise, which petitioner transferred back to the companies.
The agreement contains no language establishing a franchise, nor
do we believe that the agreement, which gives petitioner the
right to render personal services as a district manager,
establishes a franchise within the meaning of section
1253(b)(1).2 See Clark v. Commissioner, T.C. Memo. 1994-278
(implicitly rejecting the argument that a district manager with
Farmers Insurance Companies relinquished a franchise in
2 Sec. 1253(b)(1) provides: “The term ‘franchise’ includes
an agreement which gives one of the parties to the agreement the
right to distribute, sell, or provide goods, services, or
facilities, within a specified area.”
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