20 CFR 404.1057
The claimant, R, filed an application for old-age insurance benefits in October 1963. He alleged that he had derived self-employment income of $2,703 in 1962 and $1,364 in 1963 from services which he had performed as an itinerant musician.
Beginning in 1962 and continuing through September 1963, R played the accordion on street corners, in various business establishments, and at social gatherings when he happened to be in the vicinity of such gatherings and was asked to play for the guests. Each day he would go from street to street, into stores, beauty parlors, restaurants, saloons, backyards of homes and any other places where there would be groups of people. For his playing he would receive money from passers-by, customers, and guests. R made no contractual arrangements with anyone but relied solely upon the money he received for his playing. He had no license as an itinerant musician, did not hold himself out for hire other than by his performing in public, and did not belong to any union.
Under section 211(a) of the Social Security Act, 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 that subtitle which are attributable to such trade or business.
In 1962 R derived gross income in the amount of $2,773 and had expenses of $70. In 1963 his income, reduced because of ill health which incapacitated him for outdoor performances, was $1,403, and expenses were $39. He filed income tax returns for those years reporting net earnings from self-employment of $2,703 and $1,364. The proper inclusion of these earnings for social security purposes depended upon whether his activities as an itinerant musician constituted a trade or business.
Section 404.1057(a) of the Social Security Administration Regulations provides that a determination as to whether a person is "engaged in an included trade or business will be dependent upon all of the facts and circumstances in the particular case." In this regard it has been concluded that a reasonable basis exists for a finding that a particular activity constitutes a trade or business if the following factors have been substantially met:
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 evidence in this case shows that the elements for determining whether a trade or business was being carried on have been substantially met. R carried on his entertainment activities in good faith with the motivation and intention of producing income; he engaged in these activities frequently and regularly as his regular occupation; and, in effect, he held himself out to others as being engaged in the selling of his services by representing himself as a musician and playing his accordion in places where he could reasonably expect that people would pay him for his services as a musical entertainer.
The facts that the claimant was not licensed as an itinerant musician and/or that his activities may have been in violation of local ordinances and therefore illegal do not preclude a finding that he was engaged in a trade or business. The manner in which claimant performed his services shows that he solicited payment for them. He relied upon a reasonable expectation of reward as remuneration for the services he rendered and the money he received may be considered payment in return for services rendered and thus distinguishable from a gift or gratuity bestowed without consideration.
Accordingly, it is held that claimant's activities as an itinerant street musician constituted the conduct of a trade or business within the meaning of section 211(c) of the Act and that the income which he derived therefrom during 1962 and 1963 is includible in computing his net earnings from self-employment for social security benefit purposes.
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