R and her son owned and operated a real estate partnership, R and R Realty Company, in which they bought tracts of land, subdivided them, improved them, and sold them for a profit.
R was born in 1892 and needed six quarters of covered employment in order to qualify for social security old age insurance benefits. If her income from R & R Really in 1958 and 1959 counted as wages or net income from self employment for social security purposes, then she qualified for benefits. If, in the other hand, her income from the partnership was real estate investment income from the sale of a capital asset, then she did not qualify for benefits.
The key question was whether or not R’s activities constituted carrying on a trade or business. Neither the Social Security Act nor the Internal Revenue Code of 1954 to which it refers, defines a “trade or business.”
The factors considered in making this determination include: 1) whether the activity was initiated and performed with a profit motive; 2) whether it was regular and continuous; 3) whether it was engaged in as a regular occupation or calling; and 4) whether the individual held himself out to the public as engaged in the selling or goods or services.
It was held in the instant case that R’s activities in the realty business were regular and continuous and were engaged in as a regular occupation or calling. Thus, she had net income from self employment for eight consecutive quarters and qualified for old age social security insurance benefits.
See Society Security Ruling (SSR) 64-9
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.