In October 1958 R filed application for and became entitled to old age social security insurance benefits. In November 1961 she filed an application for a recomputation of her benefit amount based on alleged earnings in 1959 and 1960 from the drilling of oil on properties of which she owned leases.

In 1958 R assigned to X Oil Company the right to drill for oil on properties of which she was the leaseholder. X was in the business of drilling for oil of various properties and maintained an inventory of supplies and equipment which it deployed wherever it deemed most advantageous.

Under the terms of the agreement R was to receive one-fourth of the profits from the drilling of oil on her properties. However, if X incurred losses, she did not share in these losses.

If R was a bona dude partner in the drilling of oil on her leased properties, then the profits she realized from the enterprise would be net earnings from self employment for social security purposes and would allow for the recomputation of her benefits.

Based on the totality of circumstances, it was held that R was not a partner in the business of drilling oil. The parties did not intend a partnership and R did not share in the losses of the business. Her percentage interest in the oil profits was properly characterized as rental income from a real estate investment, which is not includible as social security earnings.

Under these circumstances, her request for a recomputation of her benefits was disallowed.

See Social Security Ruling (SSR) 62-49.

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.