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subject to self-employment tax because the payments retain the
character of the renewal commissions they replaced.
Congress, in section 1402(k), codified the standard
established in Jackson with respect to termination payments made
after December 31, 1997, to an “insurance salesman”. Taxpayer
Relief Act of 1997, Pub. L. 105-34, sec. 922(a), 111 Stat. 879.
As previously stated, section 1402(k) exempts insurance salesman
termination payments from self-employment tax if, among other
things, the amount of the payments “does not depend to any extent
on length of service or overall earnings from services performed
for such company (without regard to whether eligibility for
payment depends on length of service).” Sec. 1402(k)(4)(B). The
legislative history of section 1402(k) makes it clear that the
provision was intended to codify existing law.4
The facts, as discussed below, of the present case support
the conclusion that the present renewal commission payments
should be subject to self-employment tax because the payments are
“tied to the quantity [and] quality of the taxpayer’s prior
4After 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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