SSR 83-25c: SECTIONS 203(b) and (f) and 211(a) and (c) (42 U.S.C. 403(b) and (f) and 411(a) and (c)) WORK DEDUCTIONS -- TRADE OR BUSINESS -- APPLICABILITY OF LAWSUIT COSTS AS A BUSINESS EXPENSE
20 CFR 404.415, 404.430, 404.1066, and 404.1080(a)
Benson v. Sec., HHS, 1A Unempl. Ins. Rep. (CCH) ¶ 14,128 (C.D., California 1982)
- The social Security Administration (SSA) determined that the claimant had been overpaid $348.00 in old-age insurance benefits for the period January 1976 through April 1977 because he had improperly offset $3,000.00 in "court costs" against the wages he had earned during that period. The claimant appealed, contending that offset was proper because the "court costs" constituted expenses incurred in the operation of a trade or business. The "court costs" resulted from an unsuccessful plagiarism suit filed by the claimant in which he alleged that certain parties had devised a novel and a motion picture from a story that he had copyrighted in 1940. The district court noted that "The fact that activities are intended to make a profit is not, by itself, sufficient to establish a trade or business." The court found that the suit to establish plagiarism was really a suit in the nature of an effort to recover stolen property. Thus, the "court costs" were not expenses incurred in the operation of a trade or business and could not be offset against the claimant's wages for the period in question. Consequently, the court held that SSA's finding that the claimant had been overpaid $348.00 was supported by the evidence of record.
MARSHALL, District Judge:
In 1940, plaintiff copyrighted a story which he called "Souls in Bondage," retitled "The Russian" in 1959. In 1972, plaintiff concluded that MGM, Boris Pasternak, and Carlo Ponti had plagiarized his work in devising a novel and motion picture called "Dr. Zhivago." In 1974, plaintiff filed a plagiarism suit in this District Court which he eventually lost in 1976.
This present law suit concerns the Secretary's decision that plaintiff has been overpaid $348.00 in retirement insurance benefits for the period January 1976 through April 1977. Plaintiff contends that he did not receive enough benefits during that period.
During 1976, plaintiff was employed as a cook in a bowling alley and coffee shop. The Secretary claims that the plaintiff was overpaid $348.00 because plaintiff improperly offset $3,000 in "court costs" in connection with his plagiary suit from his bowling alley wages in computing his "net income." That offset placed him in a lower income bracket which entitled him to $348.00 more in benefits than if there had not been an offset. Plaintiff contends that the $3,000 offset was proper as a "trade or business" expense connected with his self-employment as an author and film producer.
To begin, the $3,000 figure is most questionable. That figure includes $846 for the preparation of documents which were rejected by the U.S. Supreme Court for not complying with that court's rules. Additionally, the $3,000 figure includes uncertain hundreds of dollars for typing. It appears that most of the typing may have been performed by the plaintiff's daughters who were never paid for their work. However, whether or not the $3,000 figure is correct is not essential to a decision in this matter.
The determination of what activities constitute a "trade or business" is decided upon the facts of each individual case. Clevenger v. Weinberger, 375 F.Supp. 841 (D. C. Mo. 1974). The fact that activities are intended to make a profit is not, by itself, sufficient to establish a trade or business. McDowell v. Ribicoff, 292 F.2d 174 (3rd Cir. 1961), cert. denied 82 S. Ct. 240.
Plaintiff has never produced a motion picture. He basically contends that he was self-employed since 1972. However, due to the plagiarism employed in the Dr. Zhivago film it was necessary for him to institute court proceedings to clear title to this story in order that he could produce it as an Acclaim Film. Plaintiff submitted to the Secretary a business card indicating "Presented by William H, Benson, an Acclaim Film."
Plaintiff submitted a month-to-month lease for an office which he executed in December, 1972. However, he had to give up the office in the beginning of 1973 due to the lack of funds.
Plaintiff's two daughters, in letters purportedly signed by them, indicated that they were the Vice-President and Secretary-Treasurer of Acclaim Film. They both indicated that they performed secretarial work and have not received any payment for their work but will be paid when the "money starts coming in."
Under 42 U.S.C. § 405(g) the jurisdiction of the District Court is limited to the question of whether or not the findings of the Secretary are supported by "substantial evidence." Hall v. Secretary of Health, Education and Welfare, 602 F.2d 1372 (9th Cir. 1979; Lessin v. Celebrezze, 314 F.2d 283 (U.S. App. D. C. 1963). Substantial evidence is "such evidence as a reasonable mind might accept as adequate to support a conclusion." Richardson v. Perales, 402 U.S. 389 (1971).
From the above it can be seen that there is substantial evidence to support the finding of the Secretary that plaintiff was not self-employed in a trade or business during the applicable period. Plaintiff's unsuccessful court effort to establish plagiarism of material he had written thirty years previously was really a suit in the nature of an effort to recover stolen property. If his story had been plagiarized, plaintiff could have produced his film without first instituting a law suit. Thus, the "court costs" were not expenses incurred by a trade or business and should not have been offset from plaintiff's wages in 1976. The Secretary's finding that plaintiff has been overpaid $348.00 is supported by the evidence before the Secretary.
It is therefore recommended, that judgment be entered in favor of the defendant and against the plaintiff, affirming the decision of the Secretary that plaintiff has been overpaid $348.00 and dismissing the action.
Pursuant to 28 U.S.C. 636, there is attached the Report and Recommendation of the United States Magistrate who has reviewed the complaint, the motions for summary judgment, the transcript of the record, and the objections.
The Court having reviewed the entire record, adopts the findings and conclusion of the Magistrate.
It is ordered that the defendant's motion for summary judgment is granted and the plaintiff's motion for summary judgment is denied.