R applied for and received old age social security insurance benefits beginning in May 1961.

The amount of his benefits depended, in part, on his earnings from 1961. He was a real estate broker, who also owned real estate with others as a personal investment. His holdings were owned 50% by himself and 50% by other family members.

For the year 1960, his rental properties earned $80,000. Half of this belonged to the co-owners and half to R. R charged a fee of $8,000 for negotiating leases and charging rents.

R reported net earnings from self-employment of $4,500 for 1960 on gross income of $10,000 and business expenses of $5,500.

The $10,000 gross income did not include his rental income (which is not includible in earnings because it is investment income). It did include the $8,000 he earned as fees for negotiating leases and collecting rents.

The $5,500 of expenses included $4,400 in expenses attributable to the rental properties.

Social Security ruled that R appropriately did not include his share of the rental income in his reported earnings, since it was investment income.

However, he should not have included the entire $8,000 in fees for negotiating leases and collecting rents, since 1/2 of this was for work done on his own rental properties.

Likewise, his expenses associated with the rentals needed to be cut in half to $2,200.

Thus, for 1960, R’s corrected net earnings from self employment were: $6,000 gross earnings minus $3,300 expenses; or, in other words, $2,700.

See Social Security Ruling (SSR) 62-48.

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.