During the years 1952 and 1953, A performed services as the executrix of an estate which consisted of stocks, bonds, and a farm. The stocks and bonds were the subject of specific bequests to legatees, and A's duties with respect to them consisted only of delivering them to the legatees. As to the farm, she had to rent it for a year, have it appraised, advertise it for sale, and pay one visit to it in connection with a prospective sale. A had regular employment elsewhere and this was the sole instance in which she acted as an executrix or administratrix of any estate.
The questions to be resolved are whether the services rendered by A as executrix constituted carrying on a "trade or business" within the meaning of section 211(c) of the social Security Act and whether, consequently, the commissions received by her may be included in computing net earnings from self-employment for social security purposes.
Section 211(a) of the Social Security Act provides, in pertinent part, that the term "net earnings from self-employment" means the gross income, as computed under Subtitle A of the Internal Revenue Code of 1954, derived by an individual from any trade or business carried on by such individual, less the deductions allowed under such subtitle which are attributable to such trade or business.
Section 211(c) provides that the term "trade or business," when used with reference to self-employment income or net earnings from self-employment, shall have the same meaning as when used in section 162 of the Internal Revenue Code of 1954, with certain exceptions not relevant here.
Whether or not a person is engaged in a trade or business is dependent upon all the facts and circumstances in the particular case. As a general rule, when a person is regularly engaged in an occupation or profession for profit and, as to such occupation or profession, is not an employee or not otherwise excluded from the self-employment provisions of the Act, such a person is engaged in a trade or business within the meaning of section 211(c).
A professional fiduciary or executor who regularly engages in fiduciary services and handles a number of estates is engaged in a trade or business. A nonprofessional fiduciary (for example, a person who serves as executor or administrator in isolated instances, and then only as personal representative for the estate of a deceased friend or relative) generally is not engaged in a trade or business. A non-professional fiduciary who actually carries on a trade or business in connection with the administration of an estate, such as operating a store which is part of the estate may have income includible as net earnings from self-employment. In this event, (1) the trade or business must be an asset of the estate; (2) the executor must actively participate in the operation of such trade or business; and (3) only such fees as are attributable to his operation of the trade or business are net earnings from self-employment.
In certain rare cases there may be a very large estate which is of such complexity and long duration that its administration requires extensive management activities over a long period of time. In such instances, the activities of a nonprofessional fiduciary of a single estate may constitute the conduct of a trade or business even though the assets of the estate do not include a trade or business.
A's activities as executrix consisted for the most part of marshalling and distributing the assets of the estate. Although there was a farm among the assets, A did not operate the farm or receive any special compensation with respect to it. So merely rented out the farm until a sale could be made. Further, the estate was not of such size and complexity as to require extensive management activities over a long period of time.
Accordingly, it is held that A's activities as executrix did not constitute the conduct of a trade or business and, therefore, her fees for her fiduciary activities are excluded from "net earnings from self-employment" for social security purposes.
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