Opinion ID: 196671
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Heading: facts

Text: 4 During the relevant tax years, Eagan was a life insurance agent, earning commissions from a number of insurers. He had agreed, however, in a Career Contract for Full-Time Agents with Massachusetts Mutual Life Insurance Company (Mass Mutual), that solicitation of Mass Mutual policies would be his principal business activity. 5 The Internal Revenue Code classifies a full-time life insurance salesman as an employee 1 of the insurer for whom they sell full time, subject to employment tax withholding and eligible to participate in the insurer's tax-deferred retirement plans. See I.R.C. §§ 3121(d)(3)(B), 7701(a)(20). Mass Mutual maintains retirement plans for its employee-agents, and the IRS determined 2 the plans were qualified for tax-favored treatment under section 401(a) of the Internal Revenue Code (26 U.S.C., hereafter I.R.C.). Based on Eagan's representation in the Career Contract for Full-Time Agents, Mass Mutual treated Eagan as a statutory employee and contributed portions of his compensation to a qualified retirement plan, the Mass Mutual Agents 401(k) Plan (the 401(k) plan). Under this arrangement, taxation was deferred on the portion of Eagan's compensation that Mass Mutual contributed to the 401(k) plan and on any income earned on those contributions, see I.R.C. §§ 401(k), 402(a), and 501(a), but tax would eventually be due when Eagan withdrew funds from the plan, see I.R.C. §§ 402(a), 72(t). 6 Mass Mutual contributed to the 401(k) plan on Eagan's behalf from 1981 until 1992, when his contract with Mass Mutual was terminated. On his tax returns, Eagan consistently treated himself as a statutory employee, and treated the 401(k) plan as qualified, excluding from income the contributions made on his behalf in 1987, 1988, and 1989. In 1989, Eagan withdrew $4,682 from the 401(k) plan, and he reported and paid income tax on that withdrawal on his 1989 tax return, filed in August 1990. Because Eagan was not yet 59 1/2 years old when he withdrew the funds, he was also liable for, and paid, the ten percent additional tax on early distributions under I.R.C. § 72(t). In April 1992, Eagan filed an amended tax return for 1989, claiming that he was not subject to any tax on the withdrawal from the 401(k) plan. The IRS disallowed Eagan's refund claim, and Eagan responded by filing the instant tax refund suit in the United States District Court for the District of Massachusetts, claiming a refund of $1,755.81 for the taxes on the 1989 withdrawal from the 401(k) plan.