20 CFR 404.1054(d)
Florida Statutes Annotated, Chapter 197 provides for the issuance, sale, and redemption of interest bearing tax sale certificates, which relate to delinquent taxes on real property. Pursuant to such statute, R, an old-age insurance beneficiary, purchased these certificates at auctions held annually at the X County Courthouse in Florida. Upon redemption of a tax certificate by the delinquent property owner, R is paid his purchase price plus simple interest at the rate he offered at the time he bid for the certificate at auction. He does not maintain an office, has no employees, is not licensed, and does not maintain a separate bank account for such transactions. His activities were sporadic and lacked any element of continuity or regularity. Most activities occurred during one month each year when he placed bids at auction and purchased the certificates available to him.
The question is whether the interest income which R derived from his activities in connection with the tax certificates is excluded from net earnings from self-employment under section 211(a)(2) of the Social Security Act.
Section 211(a)(2) of the Social Security Act excludes from "net earnings from self-employment," insofar as is pertinent here, dividends and interest unless received in the course of a trade or business as a dealer in stocks or securities. Under § 404.1054, Social Security Administration Regulations No. 4 (20 CFR 404.1054), a dealer in stocks and securities is defined as:
R's activities were not conducted from an established place of business. He did not advertise or hold himself out to the public as a dealer in tax sale certificates; he did not maintain an office or hire employees; and he did not use a separate bank account for dealing in the certificates. His gains from their purchase do not appear to have been derived by regularly reselling them as a merchant to customers. Rather, his purchase of the certificates appear to have been made solely for purposes of investment or speculation.
Accordingly, it is held that R's interest in come which he derived from his activities in connection with the tax certificates is excluded from net earnings from self-employment because he was not a dealer in stocks and securities.
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