- 14 - 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.Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 Next
Last modified: May 25, 2011