SSR 63-42c: SECTION 209. -- WAGES -- EXTENT AND VALUE OF SERVICES

20 CFR 404.1026

SSR 63-42c

POSS v. RIBICOFF, 289 F.2d 10 (2d Cir., 1961), cert. denied, 82 S.Ct. 178,

368 U.S. 902 (1961), rehearing denied, 82 S.Ct. 393, 368 U.S. 963

(1962) [1]

The United States Court of Appeals for the Second Circuit, in a per

curiam opinion, upheld the Secretary's decision that the amount of wages

creditable to the wife's social security earnings account were only $600

in 1956 and $150 in each of the first two quarters of 1957 and that any

additional monies nominally paid her were not wages for her services, but

were wages paid through her to her husband. The Secretary's decision had

been upheld by the United States District Court for the Eastern District

of New York in Poss v. Flemming, 187 F.Supp. 824 (1960). The District

Court in its decision (Abruzzo, District Judge) summarized the facts as

follows:

"Alsam Holding Co., Inc., and Howard Funding Co., Inc., are real estate

corporations. Each corporation owns an apartment building which they have

owned for many years. The two corporations were formed some 25 years ago.

In Alsam, Jacob, the husband of the plaintiff and a lawyer, owned 50 per

cent of the stock, and his brother, Samuel, owned the other 50 per cent.

In Howard, Jacob owned one-third of the stock, his brother, Samuel,

one-third, and the remaining one-third is owned by H. D. Pasachoff, a

nephew of the two brothers.

"Plaintiff claims that her husband served as secretary of the two

corporations until his resignation on July 1, 1956. In June, 1956, at a

family dinner, plaintiff was advised that she would be designated

secretary of the corporations effective July 1, 1956, in place of her

husband. She also claims that in 1956 and 1957 no salary was paid to her

husband and the salary apparently ordinarily paid to him was paid to her.

Plaintiff became 65 years of age on September 21, 1957.

is resignation on July 1, 1956. In June, 1956, at a

family dinner, plaintiff was advised that she would be designated

secretary of the corporations effective July 1, 1956, in place of her

husband. She also claims that in 1956 and 1957 no salary was paid to her

husband and the salary apparently ordinarily paid to him was paid to her.

Plaintiff became 65 years of age on September 21, 1957.

"It is undisputed that the plaintiff performed secretarial and clerical

services for these two corporations at home for upwards of 15 to 20 years

without compensation. The Referee found that in 1953 the plaintiff

requested payment for services rendered. He also found that Alsam agreed

to pay plaintiff $50 a month and that she actually was paid this amount

beginning in 1954 until 1957, and that any other amounts paid in 1956 and

1957 did not represent wages paid to her, and that any wages allegedly

paid to her in fact represented wages paid to her husband. Howard did pay

her some salary but what amount the record is not clear.

* * * * * *

"At the hearing before the Referee, * * *, the Referee stated * * *:

"The Referee's decision is based on the assumption that the plaintiff's

appointment as secretary was not a bona fide change in employment. He

held:

"The Court has scrutinized carefully the transcript of the hearing before

the Referee. The testimony tends to cast doubt on whether the salary

claimed by the claimant was a legitimate one or one for the purpose of

building up Social Security benefits. The Referee in analyzing the proof

had to contend with the fact that for 1956 and 1957 none of the checks

issued by Howard was produced. As to plaintiff's failure to produce these

checks, suffice it to say that the Referee as trier of the facts placed no

credence in the affidavit submitted to him explaining plaintiff's failure

to produce these checks, and of six checks issued by Alsam in 1956

totaling $2,150, one check for $1,000 bore the notation 'Repayment of

Loan' * * *

ne of the checks

issued by Howard was produced. As to plaintiff's failure to produce these

checks, suffice it to say that the Referee as trier of the facts placed no

credence in the affidavit submitted to him explaining plaintiff's failure

to produce these checks, and of six checks issued by Alsam in 1956

totaling $2,150, one check for $1,000 bore the notation 'Repayment of

Loan' * * *. The 1956 tax returns * * * of both corporations under

Schedule 'D,' 'Compensation of Officers,' does not list plaintiff as

secretary or any other officer of either corporation. These exhibits

coupled with other factors are indicative of the fact that plaintiff's

alleged appointment as secretary of both corporations was a paper

transaction to permit both plaintiff and her husband to collect social

security benefits. [2] * * *

"Based upon the facts adduced, the circumstances surrounding the change

in salary of the plaintiff in 1956 and 1957 as compared with other years,

and the lack of positive proof by checks issued by either corporation 1956

and 1957, the Referee was justified in fixing the income for Social

Security purposes at $600 a year."

* * * * * *

"In its decision affirming the Secretary's decision, the Court of Appeals

(Per Curiam) stated in part:

"The appellant argues that the appellee has no right to inquire into the

bona fides of her appointment as Secretary or the value of her services as

a stenographer. But the money benefits to which a wage earner, (not

receiving disability benefits) is entitled under 42 U.S.C.A. § 402(a) are

computed by one of various formulae prescribed by 42 U.S.C.A. § 415(a),

each of which is dependent on 'wages.' Thus it was necessary for the

Secretary [of Health, Education, and Welfare] or his delegate to determine

what part of the payments nominally made to the appellant was paid as

'wages.' On this issue, the bona fides of the appellant's appointment as

Secretary and the actual nature, extent and value of her services were

relevant

42 U.S.C.A. § 415(a),

each of which is dependent on 'wages.' Thus it was necessary for the

Secretary [of Health, Education, and Welfare] or his delegate to determine

what part of the payments nominally made to the appellant was paid as

'wages.' On this issue, the bona fides of the appellant's appointment as

Secretary and the actual nature, extent and value of her services were

relevant. And we agree with Judge Abruzzo that the appellee's findings of

fact and the inferences to be drawn therefrom are supported by substantial

evidence and are therefore conclusive under 42 U.S.C.A. § 405(b). Adams v.

Flemming, 2 Cir., 276 F.2d 901, 903.

"Affirmed."

The Supreme Court denied the claimant's request for review of the case

and later denied her request for a rehearing on the request for review.

[1] See also Dondero v.

Celebrezze , 312 F.2d 677 (2d Cir., 1963). SSR 63-40c.

[2] As this sentence of the

court's decision implies, the wages paid through Mrs. Poss for the

services performed by her husband are his earnings for purposes of

applying the retirement test in the Social Security Act. [Ed.]