SSR 62-8. WORK DEDUCTIONS -- PARTNERSHIP -- HUSBAND AND WIFE

H, the owner-operator of a bowling supply business, filed application for

old-age insurance benefits in March 1959 at age 65, and became entitled to

benefits beginning that month. H's net earnings were over $2,500 in 1959.

In March 1961, H reported to the Social Security Administration that his

net earnings for 1960 were $1,182. H explained that he and his wife had

entered into a partnership beginning January 1, 1960, and that the $1,182

was his distributive share of the net income of $2,364 form the

partnership. The question is whether a partnership existed between H and W

for the year 1960 under the following circumstances.

In May 1958 H started a wholesale bowling supply business using money

advanced to him by relatives, including $2,000 from W, his wife. Interest

was always paid on all of these loans, including the one made to him by W.

In November 1958, when business picked up, W began helping H at the store

on a part-time basis, keeping the books, preparing invoices and taking

orders by telephone. As the business developed W spent more time at the

store and since October 1960 has been working full time. H has always

spent most of his time away form the store selling bowling supplies and

making contacts. H and W talked over what purchases to make, advertising

to be done, etc., but H made the final decisions in all management

matters. The business was not known to the public as a partnership and the

business name, license, insurance, advertising, letterheads, etc., were in

H's name only. H and W had a joint bank account but W never drew checks on

it. Income tax returns for 1958 and 1959 showed H as sole owner of the

business.

ke, advertising

to be done, etc., but H made the final decisions in all management

matters. The business was not known to the public as a partnership and the

business name, license, insurance, advertising, letterheads, etc., were in

H's name only. H and W had a joint bank account but W never drew checks on

it. Income tax returns for 1958 and 1959 showed H as sole owner of the

business.

In October 1960, H had a signed agreement prepared in which it was

asserted that he and his wife had been operating as a partnership since

January 1, 1960, and that all profits would be shared equally from that

date. The agreement also set forth the duties of the partners. H was shown

to be in charge of purchasing, selling, and setting business policies; W

to be in charge of the books and to act as office manager. However, there

was no divestment of property interests by H; H continued to exercise

control over the distribution of income and retained control of all

management powers; and no change was made in the business name, license,

insurance, advertising, or letterheads. H and W filed a partnership income

tax return for 1960. H rendered substantial services in the business in

all months of 1960.

If H and W were partners throughout 1960, as alleged, H's net earnings

for 1960 would be $1,182 and his old-age insurance benefits would not be

subject to deductions under section 203 of the Act. On the other hand, if

H continued to be the sole proprietor of the business, his earnings for

1960 would be $2,364; and since he rendered substantial services in the

business in all months of 1960, his benefits would be subject to

deductions for all months of 1960 under section 203 of the Act, as in

effect for that year.

would not be

subject to deductions under section 203 of the Act. On the other hand, if

H continued to be the sole proprietor of the business, his earnings for

1960 would be $2,364; and since he rendered substantial services in the

business in all months of 1960, his benefits would be subject to

deductions for all months of 1960 under section 203 of the Act, as in

effect for that year.

Section 211(a) of the Social Security Act provides, in pertinent part,

for the inclusion of the distributive share of income from a trade or

business carried on by a partnership, as defined in section 211(d) of the

Act, of which an individual is a member in computing the net earnings form

self-employment of such individual. In determining whether a partnership

existed within the meaning of section 211(d) of the Act, the question is

whether the parties actually intended to join together for the purpose of

carrying on the business and sharing in the profits or losses. Their

intention in this respect is a question of fact to be determined form

their agreement, their conduct, their statements, the testimony of

disinterest persons, the relationship of the parties, their respective

abilities and capital contributions, the actual control of income and the

purposes for which it is used, and any other facts throwing light on their

true intent.

In this case, there is evidence that the parties originally did not

intend to conduct the business as a partnership. While a partnership

return was filed for 1960 and the written agreement in October 1960

purported to show that the business had been a partnership since January

1960, no change of substance was effected in the conduct of the business

s throwing light on their

true intent.

In this case, there is evidence that the parties originally did not

intend to conduct the business as a partnership. While a partnership

return was filed for 1960 and the written agreement in October 1960

purported to show that the business had been a partnership since January

1960, no change of substance was effected in the conduct of the business.

The business was not held out to the public as a partnership; H retained

control over the assets essential to the business and made the final

decisions in the management of the business and the distribution of

income; and W's activity was that ordinarily exercised by a wife who

renders assistance to her husband in the operation of his business.

Accordingly, it is held that W was not a partner of H in the operation of

the business in 1960. Therefore, H's net earnings for 1960 were $2,364 and

since he rendered substantial services in all month of 1960, his old-age

insurance benefits were subject to deductions for all months of that

year.