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consists of the net earnings derived by an individual (other than
a nonresident alien) from a trade or business carried on by such
individual. Sec. 1402(a) and (b); sec. 1.1401-1(c), Income Tax
Regs. To constitute self-employment income, “there must be a
nexus between the income received and a trade or business that
is, or was, actually carried on.” Newberry v. Commissioner, 76
T.C. 441, 444 (1981). The “income must arise from some actual
(whether present, past, or future) income-producing activity”.
Id. at 446. Additionally, section 1.1402(a)-1(c), Income Tax
Regs., provides that gross income derived from an individual’s
trade or business may be subject to self-employment tax even when
it is attributable to services rendered in a prior taxable year.
Jackson v. Commissioner, 108 T.C. 130, 134 (1997); Schelble v.
Commissioner, 130 F.3d 1388, 1392 (10th Cir. 1997), affg. T.C.
Memo. 1996-296.
In order to be derived from a trade or business the payment
received by an insurance agent after termination must be “tied to
the quantity or quality of the taxpayer’s prior labor, rather
than the mere fact that the taxpayer worked or works for the
payor.” Milligan v. Commissioner, 38 F.3d 1094, 1098 (9th Cir.
1994), revg. T.C. Memo. 1992-655; see Jackson v. Commissioner,
supra at 135. The taxpayer in Milligan was not liable for
self-employment tax because “none of his business activity was
the ‘source’ of the Termination Payments. * * * Nor were they
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