A landlord of agricultural property can only count earnings from the property as social security income if he or she materially participates in the production or management of agricultural or horticultural commodities.

Material participation is a highly individualized determination and each case must be decided on its own merits.

Three cases illustrate the principle of material participation.

Case One: F owned a 190 acre farm which he leased to his grandson G for the years 1959 and 1960. Under the agreement, F was to pay the costs of the seed corn, fertilizer, and spray for the crops. He was also to help with the harvesting. G was to assume all other costs, including the costs of machinery. F and G were to consult with each other on all matters relating to the planting, cultivating, and harvesting the crops, with F having the right to make final decisions. F had the right to enter the land to inspect the crops, which he did several times per year. He worked in the fields for about 20 hours each year during harvest season.

Held: F materially participated in the management and production of the crops and his income from the farm was therefore creditable to him for social security purposes. Because of this, F had sufficient quarters of coverage to qualify for social security benefits.

Case 2: M owned 147 acres of farm land which she rented to her son, T, after she moved to the city. Pursuant to an oral agreement, M contributed 1/3 of the farm’s operating expenses and T contributed 2/3 of these expenses. M did not participate in farm activities other than her contributing 1/3 of the expenses and granting T the use of her livestock, implements, and machinery. Although M frequently visited T on the farm, she did not inspect the crops, nor advise or consult with her son about farm operations.

Held: M did not materially participate in the management or production of agricultural or horticultural commodities. Therefore, her income from the farm was real estate rental income and were not creditable to her for social security purposes. Because of this, she did not have enough quarters of coverage to qualify for social security benefits.

Case 3: L owned a 340 acre farm 30 miles from her home which she rented to B. L and B were to share equally the direct costs of crop production. L was to supply the machinery and equipment for the farm operations. B was to perform all of the physical work on the farm and to have complete control over the planting, cultivation, and harvesting of crops. L and B were to make decisions jointly with respect to the sale of the crops as to the time, place, and buyers. They were to split the profits from the sale of the crops.

Held: L was not a material participant in the management or production of agricultural or horticultural commodities on her farm and, therefore, her earnings from the farm were not countable for social security purposes. Because of this, she did not have enough quarters of coverage to qualify for social security benefits.

See Social Security Ruling (SSR) 63-43.

This material should not be construed as legal advice for any particular fact situation, but is intended for general informational purposes only. For advice specific to any individual situation, an experienced attorney should be contacted.