SSR 61-44. PERSONAL SERVICES PERFORMED FOR FAMILY MEMBER OF CLOSE FRIEND
- Where an individual cared for her invalid brother-in-law in her own home; performed nursing and other personal services for him;had never previously engaged in such activities as a profit-making enterprise; performed such activities primarily because of the existing family relationship and without a reasonable expectation that she would be paid; held, performance of these activities did not constitute the carrying on of a "trade or business" within the meaning of section 211(c) of the Act, and any payments received for these activities are not includible in computing her "net earnings from self-employment."
A applied for old-age insurance benefits in July 1960 on attainment of age 62, and she became entitled to benefits beginning with that month. However, a question was raised as to the amount of her net earnings from self-employment for 1958. A determination of the amount of her earnings for that year was necessary since it would affect the amount of her monthly old-age insurance benefit. A alleged earnings of $1,850 for the year 1958. Of this amount $850 had been derived from the operation of her farm; the remaining $1,000 reported by her for care she had given her invalid brother-in-law from 1952 to December 1957. The question is whether this latter amount was properly included by A in computing her net earnings from self-employment for 1958. This, in turn, depends on whether or not A was carrying on a trade or business in caring for her brother-in-law under the following circumstances.
When A's brother-in-law, B, became ill in 1952, A took him into her home where she could more easily care for him and for her husband who was also ill. A cared for her husband and B until hr husband died and, thereafter, maintained the home and nursed B until he died in December 1957.
There was no agreement that A was to receive any reimbursement for the care and services rendered by her, either when B went to live in A's home or afterwards. A supplied room and board to B, provided nursing services when needed, purchased medicines and other supplies for him on various occasions, and from time to time received money from B toward payment of groceries and other items purchased. The services performed for B were similar to those she performed for her husband during his illness, but A had never performed such services for anyone else. A's regular occupation was that of housewife. After her husband's death she earned her livelihood by operating the farm that she inherited from him.
After B died, it was found that he left an estate of several thousand dollars, and A then decided to claim $1,500 as reimbursement for the care and maintenance she had furnished him. B's children paid her this amount in 1958, and she reported the $1,500, less $500 estimated expenses, as income derived in 1958 from the business of caring for and nursing her brother-in-law.
Section 211(a) of the Social Security Act provides 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) of the Act 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.
In determining the existence or nonexistence of a trade or business, factors taken into consideration 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 others as being engaged in the selling of goods or services. No single factor is controlling, and each individual case must be resolved on its own merits with due consideration of the entire factual situation.
The services A performed and the providing of a home for B were not activities initiated for the production of income. A did not hold herself out to others as being engaged in a profit-making enterprise. The performance of the activities arose from the natural love and affection existing between relatives and A did not have any reasonable expectation that she would profit from such services.
Accordingly, it is held that A was not engaged in a "trade or business" within the meaning of section 211(c) of the Act in performing services for R, and the payment she received for such services is not includible in computing her "net earnings from self-employment." Therefore, A's net earnings for 1958 for the purpose of computing the amount of her old-age insurance benefit are $850, the amount she derived from the operation of her farm.