Jacob Poss, a lawyer and real estate investor, owned a 50% interest in Alsam Holding Co., Inc. and a 33% interest in Howard Funding Co., Inc. His brother Samuel owned 50% of Alsam Co. and 33% of Howard Co. His nephew H.D. Pasachoff owned the other 1/3 of Howard Co. Both of these companies owned an apartment building.

Jacob served as Secretary of both companies. His wife (her first name has been lost to history, but let us call her “Gertrude”, or simply “Gerty” for short) performed services for both companies as a stenographer and typist (using an ancient device of known as a typewriter) for many years. For 15 or 20 years, Mrs. Poss (I have changed my mind about the moniker “Gerty”) worked without compensation. Beginning in 1953 she began receiving a salary of $600 per year.

At the dinner table in June 1956, Mr. Poss told Mrs. Poss that, effective July 1st of that year, he was resigning as Secretary of the companies and that she was taking his place as the new Secretary. Her new salary was to be $4,200 per year. However, the services she performed for the company did not materially change.

Mrs. Poss claimed that her social security wages for the years 1956 and 1957 were $4,200 per year. The Social Security Administration disagreed.

A hearing Referee determined that Mrs. Poss’s designation as corporate Secretary was merely a paper transaction to allow her husband to collect social security benefits and to allow her to become eligible for social security benefits. He found that her duties did not materially change when her title changed and that her husband was still the “moving spirit” in the companies’ activities. He found that $600 per year was her actual wages and that the balance of the $4,200 per year was wages paid to her husband.

Mrs. Poss appealed to federal district court, which upheld the agency’s decision. The court agreed with the Referee that, although Mrs. Poss had affixed her signature as Secretary to some corporate documents, this had only been a superficial assumption of the duties of that office.

Mrs. Poss appealed to the Second Circuit Court of Appeals. That court affirmed the decision, holding that it was proper for the Referee to scrutinize the “bona fides” of the transaction, in effect holding that substance should prevail over form.

Mrs. Poss appealed to the U.S. Supreme Court, which denied her request for review and later denied her request for a rehearing. This marked the end of her ability to appeal. But one must admire her persistence.

See Poss v. Ribicoff, 289 F.2d 10 (2nd Cir. 1961), cert. denied, 82 S.Ct. 178, 368 U.S. 902 (1961), rehearing denied, 82 S.Ct. 393, 368 U.S. 963 (1962).

See also Social Security Ruling (SSR) 63-42c.

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.