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 part-owner of two corporations resigned as secretary of both on July 1, 1956, but continued to be a "moving spirit" in the corporate affairs and in fulfilling the duties of secretary. His wife, who had performed stenographic and typing services for the corporations without remuneration until 1953 and for $600 a year thereafter, was designated secretary effective July 1956 at a salary of $4,200 a year but her responsibilities and services did not materially change. Held, the wife's wages continued to be $600 a year and any additional amounts reported for her were wages paid through her to her husband. Moreover, it was proper for the Secretary to inquire into the bona fides of the wife's appointment to the corporate offices, and the nature, extent, and value of her services to the corporation.

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.

"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 * * *:

'Basically, the question is, was there a bona fide change in employment or was this merely a paper transaction to permit you to collect benefits and to permit her to become eligible for benefits?'

"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:

'Although the claimant affixed her signature to some corporate documents as secretary, the Referee finds that this was merely a superficial assumption of the duties of that office. He is convinced that in fact the claimant's husband, Jacob M. Poss, continued as a "moving spirit" in the operation of the corporations and as "Secretary" and that any payments made to the claimant for services as "Secretary" represented payments of wages to her husband.'

"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' * * *. 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. 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.


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.]

Back to Table of Contents