USCA1 Opinion

August 2, 1993

[NOT FOR PUBLICATION]

UNITED STATES COURT OF APPEALS

FOR THE FIRST CIRCUIT
____________________
No. 92-2392
NORMAN D. ERICKSON and MARILYN J. ERICKSON,
Petitioners, Appellants,
v.
COMMISSIONER OF INTERNAL REVENUE,
Respondent, Appellee.
____________________
APPEAL FROM THE UNITED STATES TAX COURT
[Hon. Francis J. Cantrel, Judge]
_____
____________________
Before
Selya, Circuit Judge,
_____________
Campbell, Senior Circuit Judge,
____________________
and Cyr, Circuit Judge.
_____________
____________________

Charles J. Reilly with whom Reilly Law Associates was on br

__________________
______________________
for petitioners.
Alice L. Ronk, Appellate Section, Tax Division, Department
______________
Justice, with whom James A. Bruton, Acting Assistant Attorney Gener
_______________
Gary R. Allen, Chief, Appellate Section, Tax Division, Department
_____________
Justice, and Bruce R. Ellisen, Appellate Section, Tax Divisi
__________________
Department of Justice, were on brief for respondent.
____________________
____________________

CAMPBELL, Per Curiam.

__________
determined
Norman

a deficiency in the 1986 income tax of appellants

and Marilyn Erickson.

$50,796 received
Norman Erickson
served

as

an

The

upheld the

The issue on appeal is whether

by appellants

under

and the insurance

insurance

agent

subject to the self-employment

1402.

The Internal Revenue Service

United States

an agreement

between

company for which

he had

self-employment

income

is
tax.

Tax Court

See 26 U.S.C.
___
found that

deficiency determination against

1401,
it

is and

appellants, who

now appeal.1
We
applicable

briefly
law,

summarize

which

are

the

relevant

described

in

facts

detail

and

in

the

published opinion of the Tax Court, Erickson v. Commissioner,

________
____________
64

T.C.M. (CCH)

963

(1992).

Norman

Erickson worked

for

twenty years as a general insurance agent of the Union Mutual

Life

Insurance

insurance

Company

and

as an independent

on the policies written

related companies.

sold

contractor, earning commissions

by him and "renewal commissions"

those of his policies that were

renewed.

that

income when he

Mr. Erickson's commission

constituted

He

self-employment

income

on

Appellants concede

subject

was an agent
to

the

self-

employment tax.

____________________
1.
The Commissioner does not appeal from the portion of the
Tax Court's memorandum holding that appellants were not
negligent within the meaning of 26 U.S.C.
6653(a)(1).
-2-

In

November

1983

Union

Mutual

terminated

its

relationship
Erickson
Floored

with

Erickson

and Union

Mutual

for the

payment

fifteen years or more,

have received if

Union

Mutual.

Erickson,

to Erickson,

he had continued

A number of legal
Mutual and

commission

agreements.

other

agents.

the General

Agreement II in

Agent

December 1983,

over

a period

other agents,
the

payments

Union Mutual

to be an

agent of

not including

computation

under

of

various

settled the disputes

their

leveling
by entering

into a Settlement Agreement and General Release with all

former agents, including Erickson.
this

case was

paid

of

disputes arose in 1984 and

apparently concerning

renewal

its

renewal commissions that he otherwise

would

between Union

all

entered into

Commission Leveling

providing

1985

and

to Erickson

its

The $50,796 in dispute in

in

1986 by

Union

Mutual

pursuant to the Settlement Agreement.

Section 1401

of

the Code

"self-employment

income"

employment income

consists of

employment
year."

26

employment"
individual
individual,

of

every

imposes

a tax

on

individual.

the "net earnings

the
Self-

from self-

derived by an individual . . . during any taxable

U.S.C.
is

1402(b).

defined

from any
less the

as

"Net earnings

"gross

trade or

derived

business carried

deductions

allowed by

which are attributable to such trade

-3-

income

from

by

on by

this

or business."

selfan
such

subtitle
Id. at
___

1402(a).

The Commissioner

Agreement

payments

commissions.
Settlement

determined that

represented

the

Agreement

was

Settlement

under 26 U.S.C.

1401.

974 (1975); Becker v.

______
9446, at 84,298,

contract

renewal

of

sale

for

Mr.

The parties agree on the law:

Agreement payments

commissions, then they are

If,

Erickson's

Appellants argued before the Tax Court that the

Erickson's insurance business.

if

Mr.

the Settlement

represented

renewal

taxable as self-employment income

See Simpson v. Commissioner, 64 T.C.

___ _______
____________
Tomlinson, 62-1 U.S. Tax Cas.
_________

9 A.F.T.R.2d (P-H)

(CCH)

1408 (S.D. Fla.

1962).

as appellants contend, the payments were for the sale of

business
income.

assets,

they

do

not

constitute

self-employment

See Erickson, 64 T.C.M. at 967.

___ ________
The only issue for this court, then, is whether the

Tax
under

Court erred

in

finding, id.
___

at 967-68,

the Settlement Agreement were

commissions
Erickson's

and

were

not

payments

insurance business

that payments

made in lieu of renewal

for

to Union

the sale
Mutual.

of

Mr.

Tax Court

findings as to
the
will

the purpose of

a particular transaction

and

intent of the parties involved are findings of fact that

be reversed

Commissioner,
____________
evidence

if clearly

962 F.2d

in

findings.

only

1077, 1080 (1st

the record
The

erroneous.

supports

Settlement

the

Agreement

Crowley
_______

Cir. 1992).
Tax Court's
makes

v.

Ample
present

absolutely no

reference to a sale of a business or business assets.

On its

-4-

face,

the

Leveling
sale

agreement

simply

Agreement II,

but an

and

which appellants

agreement for

commissions that

terminates

the uniform

otherwise would

replaces

concede was
payment of

have been received

the
not a

renewal
by Mr.

Erickson.

The stated purpose of the parties in entering the

Settlement

Agreement was

with certainty

to "establish

all of their outstanding

___

fully, finally

and

obligations arising

out of the general agent contractual relationship between the

parties."

Moreover, Mr. Erickson admitted

before the Tax Court

that he owned very few

in his testimony
of the supplies

and

pieces of

staff
the

equipment retained

at the insurance office,

sale

payroll

transaction,
before the

supports his
of the

actually

was on

alleged sale.

Settlement Agreement

Union Mutual.

which he claims

vague testimony that he

period of time.
for the

by

No

was part of
Union

Mutual

documentary evidence
"negotiated" the terms

with Union

On this record, it was

Tax Court to reject

the

"His"

Mutual over a

long

entirely reasonable

Mr. Erickson's characterization

of the transaction.
Because
$50,796

received

the

Tax

by

Court's

determination

that the

appellants

represented

renewal

commissions was not clearly

challenge the

taxability

erroneous, and appellants do not

of renewal

employment income, we affirm.

-5-

Affirmed.
_________

commissions

as

self-

-6-