Mrs. Maxwell owned a 375 acre farm which she leased to five tenants. The tenants raised cotton and corn. Mrs. Maxwell supplied one fourth of the expenses for the seed, fertilizer, and poison for the cotton and none of the expenses for the corn. Three of the tenants grew only corn, one grew online cotton, and one grew both corn and cotton. Mrs. Maxwell only occasionally inspected the crops and gave advice to the tenants on raising the crops.

In 1954, an amendment to the Social Security Act placed farmers without the coverage of the Act for the first time but excluded income from rentals. However, in 1956, in order not to treat farmer landlords so harshly, Congress concluded that landlords of a farm who materially participate in the production or management of farm commodities were covered under the Social Security Act.

There was a two-part test for determining material participation: 1) that there was an arrangement between landlord and tenant that landlord would materially participate in the production or management of agricultural or horticultural commodities, and 2) there was actual material participation by the landlord in the management or production of agricultural or horticultural commodities.

Although this was couched as an exception to an exclusion, Congressional intent was clear that those who suffered a diminished or eliminated income as a result of old age were to be covered, while those whose passive income continued were not.

Social Security had concluded that Mrs. Maxwell’s activities on the farm did not rise to the level of material participation. Mrs. Maxwell appealed and obtained a reversal of this decision by the federal district court. Social Security appealed this reversal.

The Fifth Circuit Court of Appeals reversed the district court’s decision, holding that Social Security’s determination that Mrs. Maxwell did not materially participate in the production of management of farm commodities was supported by substantial evidence. Mrs. Maxwell was therefore not covered under the Social Security Act.

See Celebrezze v. Maxwell, 315 F.2d 727 (5th Cir. 1963). See also Social Security Ruling (SSR) 64-25c.

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