Nancy L. and Gerald L. Harper - Page 4




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          year.  The second form of payment was in the form of net earned             
          commissions.  These earned commissions were calculated on a                 
          policy-by-policy basis as premiums were paid by policyholders.              
          Earned commissions were applied in the following order:  (1) To             
          recover outstanding debits in the form of advance commissions;              
          (2) to reimburse Primerica for advanced business expenses such as           
          license fees, etc.; and (3) to cover any outstanding amounts that           
          had been charged to a sales representative’s account (Chargeback            
          Recovery).  Primerica would report any net earned commissions               
          credited during the taxable year to a sales representative’s                
          account to the IRS on Form 1099-MISC, Miscellaneous Income.                 
               Upon selling an insurance policy, Mrs. Harper received an              
          immediate advance equal to a percentage of the premiums due on              
          the policy and was entitled to keep this amount if, and only if,            
          the policy was held by the insured for 1 year.  These advances              
          were not reported to the IRS as income until the 1-year mark                
          elapsed, and Mrs. Harper had an unconditional right to the funds            
          or their equivalent.                                                        
               Primerica recorded monthly commission account statements for           
          Mrs. Harper for each month of 2003.  Consistent with the dates of           
          her affiliation with Primerica, the last monthly statement                  
          showing policy sales was dated July 31, 2003.  The final monthly            
          summary is dated December 31, 2003, and reports the following:              








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