SSR 67-24: SECTIONS 210(j) and 211(a) and (c). -- EMPLOYMENT -- TRADE OR BUSINESS -- FAMILY CARE HOME

20 CFR 404.1507

SSR 67-24

Where an individual furnishes food and lodging in her own home to adult patients in accordance with an agreement with a State Department of Mental Hygiene; where the State pays her $125 per month per patient, part of which enures to her benefit; where she receives no instructions as to how to care for these patients and there is no evidence showing a right to control such individual in performing these services; held, the individual is not an employee of the State but her services constitute a trade or business and the remuneration derived therefrom is includible in computing her net earnings from self-employment.

D has an arrangement with the State Department of Mental Hygiene to provide family care for five or six adult patients in her own home. She provides them with home care and meals and is paid approximately $125 per patient per month by the Department of Mental Hygiene. She is given no instructions as to the patients' care and the meals she provides. A State social worker brings D new patients and visits once or twice monthly to check the facilities, including the menus and preparation of meals. D's home is not licensed and she has no contract with the State but she is issued a certificate by the Department of Mental Hygiene showing that her home meets certain required standards of hearing, ventilation, room size, and the like. D does not advertise or actually hold herself out to the general public as available to care for patients. She considers that she is performing an act of charity and a service to the community by providing care for these patients, and states that she does not wish to make a profit. She does rely, however, on at least some of the money received from the DMH in order to get along.

To be covered under the Social Security Act, a person must either be receiving wages as an employee in covered employment, or earnings from a trade or business covered by the law as a self-employed individual. The question is therefore whether D is an employee or a self-employed person for purposes of crediting earnings to her social security account.

Section 210(j) of the Social Security Act provides that the term "employee" means any individual who, under the usual common- law rules applicable in determining employee-employer relationship, has the status of an employee. Such a relationship exists under common-law rules when an individual is subject to the will and control of the person or entity for whom he performs services, not only as to the result to be accomplished by the work but also as to exactly how the work will be done. Whether an individual is an employee under the above rules is largely a question of fact to be determined from the facts and circumstances in each case. The State does not control the services performed by D nor does it have the right to direct her in the ways and means of conducting the home. Her services then are not being performed as an employee of the Department of Mental Hygiene.

The question remaining is therefore whether D's activities in providing family home are for the patients sent to her by the Department of Mental Hygiene constitute carrying on a "trade or business" within the meaning of section 211(c) of the Social Security Act and consequently whether the remuneration received by her for those services may be included in computing her net earnings from self-employment for social security purposes.

Section 211 of the Social Security Act provides in pertinent part:

(a) 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 * * *

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(c) 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 * * *

Section 404.1057 of Regulations No. 4 of the Social Security Administration (20 CFR 404.1057) provides that a determination as to whether a person is "engaged in an included trade or business will be dependent upon all the facts and circumstances in the particular case." A reasonable basis exists for a finding that a particular activity constitutes a trade or business when a person is regularly engaged in an occupation or profession for a livelihood or profit, he holds himself out to others as being engaged in the selling of goods and/or services, and he is not otherwise excluded from the self-employment provisions of the Act.

No single factor is controlling and each individual case must be decided on its own merits with due consideration being given to the entire factual situation. The presence of the profit motive, however, is usually a significant factor in determining that a trade or business is being conducted. As in this case, the individual often states that there is no profit motive, but the facts establish that in reality such motive does exist. While D has stated that she does not wish to make a profit from her family care services for the patients in her home, the evidence shows that she relies on the money received from the DMH to help her get along. This fact provides a reasonable basis for finding that a profit motive exists in this case. Moreover, the facts show that substantially all the other elements cited above for determining whether a trade or business is being carried on have also been met. D is engaged in an income-producing activity which operates on a regular, continuing basis. While D does not advertise, it is known to the Department of Mental Hygiene that she has regularly cared for this type of patient and the agency continues to refer new patients to her. She is in effect holding herself out as providing a specific type of service.

It is held, therefore, that D's activities in operating a family care home for adult patients in her own home under the above circumstances constitute the conduct of a trade or business and that the income derived therefrom is includible in computing her net earnings from self-employment.

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