A worker owned a bowling supplies business, which he started with a loan from his wife. He started out part time but as the business grew, he began to devote full time to the business. The firm’s letterhead, advertising, insurance, and licenses were all in his name. Though his wife performed some administrative tasks for the company, the husband made all the major decisions.

In March 1959, the worker attained 65 years of age and became entitled to old-age social security insurance benefits. The question arose as to whether the profits from the business were net earnings from self-employment that would create work deductions from his social security benefits, and if so, how much.

The husband claimed that his wife was an equal partner in the business, and produced a copy of a partnership agreement.

However, there was no substantive change in how the business was run before the partnership agreement and after. Therefore, the agency looked to substance over form and held that all the profits from the business were the husband’s net earnings from self-employment. Work deductions were imposed.

See Social Security Ruling (SSR) 62-8.

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.