excess of $1,200 shall be charged to months as follows: The first $80 of such excess shall be charged to the first 121 month of such taxable year, and the balance, if any, of such excess shall be charged at the rate of $80 per month to each succeeding 122 month in such year to which such charging is not prohibited by the last sentence of this paragraph, until all of such balance has been applied. If an individual's earnings for a taxable year of less than twelve months are more than the product of $100 times the number of months in such year, the amount of such earnings in excess of such product shall be charged to months as follows: The first $80 of such excess shall be charged to the first 123 month of such taxable year, and the balance, if any, shall be charged at the rate of $80 per month to each succeeding 124 month in such year to which such charging is not prohibited by the last sentence of this paragraph, until all of such balance has been applied. Nothwithstanding the preceding provisions of this paragraph, no part of the excess referred to in such provisions shall be charged to any month (A) for which the individual whose earnings are involved was not entitled to a benefit under this title, (B) in which an event described in paragraph (2), (3), (4), or (5) of subsection (b) occurred, (C) in which such individual was age seventytwo or over, or (D) in which such individual did not engage in self-employment and did not render services for wages (determined as provided in paragraph (4) of this subsection) of more than $100.125

(3) (A) As used in paragraph (2), the term "first month of such taxable year" means the earliest month 126 in such year to which the charging of the excess described in such paragraph is not prohibited by the application of clauses (A), (B), (C), and (D) thereof.

(B) For purposes of clause (D) of paragraph (2)—

(i) An individual will be presumed, with respect to any month, to have been engaged in self-employment in such month until it is shown to the satisfaction of the Secretary that such individual rendered no substantial services in such month with respect to any trade or business the net income or loss of which is includible in computing (as provided in paragraph (4) of this subsection) his net earnings or net loss from self-employment for any taxable year. The Secretary shall by regulations prescribe the methods and criteria for determining whether or not an individual has rendered substantial services with respect to any trade or business.

(ii) An individual will be presumed, with respect to any month, to have rendered services for wages (determined as provided in paragraph (4) of this subsection) of more than

121 Sec. 308 (a) of P. L. 85-840 changed "last" to "first", effective with respect to taxable years beginning after August 1958.

122 Sec. 308 (a) of P. L. 85-840 changed "preceding" to "succeeding", effective with respect to taxable years beginning after August 1958.

123 See footnote 121.

124 See footnote 122.

125 Sec. 308 (c) of P. L. 85-840 substituted "$100" for "$80", effective with respect to taxable years beginning after August 1958.

128 Sec. 308 (b) of P. L. 85-840 replaced the phrase "the term 'last month of such taxable year means the latest month," with the phrase "the term 'first month of such taxable year' means the earliest month," effective with respect to taxable years beginning after August 1958.

$100 127 until it is shown to the satisfaction of the Secretary that such individual did not render such services in such month for more than such amount.

(4) (A) An individual's earnings for a taxable year shall be (i) the sum of his wages for services rendered in such year and his net earnings from self-employment for such year, minus (ii) any net loss from self-employment for such year.

(B) In determining an individual's net earnings from selfemployment and his net loss from self-employment for purposes of subparagraph (A) of this paragraph and subparagraph (B) of paragraph (3), the provisions of section 211, other than paragraphs (1), (4), and (5) of subsection (c), shall be applicable; and any excess of income over deductions resulting from such a computation shall be his net earnings from self-employment and any excess of deductions over income so resulting shall be his net loss from self-employment.

(C) For purposes of this subsection, an individual's wages shall be computed without regard to the limitations as to amounts of remuneration specified in subsection (a), (g) (2), (g) (3), (h) (2), and (j) of section 209; and in making such computation services which do not constitute employment as defined in section 210, performed within the United States by the individual as an employee or performed outside the United States in the active military or naval service of the United States, shall be deemed to be employment as so defined if the remuneration for such services is not includible in computing his net earnings or net loss from self-employment.

(5) For purposes of this subsection, wages (determined as provided in paragraph (4) (C)) which, according to reports received by the Secretary, are paid to an individual during a taxable year shall be presumed to have been paid to him for services performed in such year until it is shown to the satisfaction of the Secretary that they were paid for services performed in another taxable year. If such reports with respect to an individual show his wages for a calendar year, such individual's taxable year shall be presumed to be a calendar year for purposes of this subsection until it is shown to the satisfaction of the Secretary that his taxable year is not a calendar year.

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Change in Records After Expiration of Time Limitation Sec. 205. (c) (5) (F) to conform his records to tax returns or portions thereof (including information returns and other written statements) filed with the Commissioner of Internal Revenue under title VIII of the Social Security Act, under subchapter E of chapter 1 or subchapter A of chapter 9 of the Internal Revenue Code of 1939, or chapters 2 and 21 of the Internal Revenue Code of 1954 or under regulations made under authority of such title or subchapter or chapter, and to information returns filed by a State pursuant to an agreement under section 218 or regulations of the Secretary thereunder; except that no amount of self-employment income of an individual for any taxable year (if such return or statement was filed after the

127 See footnote 125.

expiration of the time limitation following the taxable year) shall be included in the Secretary's records pursuant to this subparagraph:

Exclusions From Employment

Sec. 210. (a) (3) Service performed by an individual in the employ of his son, daughter, or spouse, and service performed by a child under the age of twenty-one in the employ of his father or mother;

7. Service (other than service included under an agreement under section 218 and other than service which, under subsection (1), constitutes covered transportation service) performed in the employ of a State, or any political subdivision thereof, or any instrumentality of any one or more of the foregoing which is wholly owned by one or more States or political subdivisions;

Citizen of Puerto Rico

Sec. 210. (j) An individual who is a citizen of Puerto Rico (but not otherwise a citizen of the United States) and who is not a resident of the United States shall not be considered, for the purposes of this section, as a citizen of the United States prior to the effective date specified in section 219.

Net Earnings From Self-Employment

Sec. 211. (a) (6) (A) In the case of any taxable year beginning before the effective date specified in section 219, the term "possession of the United States" when used in section 931 of the Internal Revenue Code of 1954 with respect to citizens of the United States shall include Puerto Rico;

(B) In the case of any taxable year beginning on or after the effective date specified in section 219, a resident of Puerto Rico shall compute his net earnings from self-employment in the same manner as a citizen of the United States but without regard to the provisions of section 933 of such code;

Quarter of Coverage

Sec. 213. (a) (2) (A) The term "quarter of coverage" means, in the case of any quarter occurring prior to 1951, a quarter in which the individual has been paid $50 or more in wages, except that no quarter any part of which was included in a period of disability (as defined in section 216 (i)), other than the initial quarter of such period, shall be a quarter of coverage. In the case of any individual who has been paid, in a calendar year prior to 1951, $3,000 or more in wages, each quarter of such year following his first quarter of coverage shall be deemed a quarter of coverage, excepting any quarter in such year in which such

individual died or became entitled to a primary insurance benefit and any quarter succeeding such quarter in which he died or became so entitled, and excepting any quarter any part of which was included in a period of disability, other than the initial quarter of such period. (B) The term "quarter of coverage" means, in the case of a quarter occurring after 1950, a quarter in which the individual has been paid $50 or more in wages (except wages for agricultural labor paid after 1954) or for which he has been credited (as determined under section 212) with $100 or more of self-employment income, except that

(i) no quarter after the quarter in which such individual died shall be a quarter of coverage, and no quarter any part of which was included in a period of disability (other than the initial quarter and the last quarter of such period) shall be a quarter of

coverage;

(ii) if the wages paid to any individual in any calendar year equal $3,600 in the case of a calendar year after 1950 and before 1955, or $4,200 in the case of a calendar year after 1954 and before 1959, or $4,800 in the case of a calendar year after 1958,128 each quarter of such year shall (subject to clause (i)) be a quarter of coverage;

*

*

Fully Insured Individual

*

Sec. 214. (a) (1) In the case of any individual who died prior to September 1, 1950, the term "fully insured individual" means any individual who had not less than one quarter of coverage (whenever acquired) for each two of the quarters elapsing after 1936, or after the quarter in which he attained the age of twenty-one, whichever is later, and up to but excluding the quarter in which he attained retirement age, or died, whichever first occurred, except that in no case shall an individual be a fully insured individual unless he has at least six quarters of coverage.129

(2) In the case of any individual who did not die prior to September 1, 1950, the term "fully insured individual" means any individual who had not less than

(A) one quarter of coverage (whether acquired before or after such day) for each two of the quarters elapsing after 1950, or after the quarter in which he attained the age of twenty-one, whichever is later, and up to but excluding the quarter in which he attained retirement age, or died, whichever first occurred, except that in no case shall an individual be a fully insured individual unless he has at least six quarters of coverage; or

(B) forty quarters of coverage,

not counting as an elapsed quarter for purposes of subparagraph (A) any quarter any part of which was included in a period of disability (as defined in section 216(i)) unless such quarter was a quarter of

coverage.

128 Sec. 102 (c) of P. L. 85-840 inserted the words "and before 1959, or $4,800 in the case of a calendar year after 1958," effective August 28, 1958.

129 The 1954 Amendments added a provision whereby an individual who died uninsured prior to September 1, 1950, and who had at least 6 quarters of coverage is deemed to be a fully insured individual. The provision is applicable only in the case of monthly benefits under sec. 202 of the Act for months after August 1954 on the basis of applications filed after August 1954. (See sec. 109 of the 1954 Amendments, p. 199.)

(3) In the case of any individual who did not die prior to January 1, 1955, the term "fully insured individual" means any individual who meets the requirements of paragraph (2) and, in addition, any individual with respect to whom all but four of the quarters elapsing after 1954 and prior to (i) July 1, 1957, or (ii) if later, the quarter in which he attained retirement age or died, whichever first occurred, are quarters of coverage, but only if not fewer than six of such quarters so elapsing are quarters of coverage.

130

(4) When the number of elapsed quarters specified in paragraph (1) or (2) (A) is an odd number, for purposes of such paragraph such number shall be reduced by one.

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Sec. 215. *

Average Monthly Wage

(b) (1) For the purposes of column III of the table appearing in subsection (a) of this section,131 an individual's "average monthly wage" shall be the quotient obtained by dividing the total of his wages and self-employment income after his starting date (determined under paragraph (2)) and prior to his closing date (determined under paragraph (3)), by the number of months elapsing after such starting date and prior to such closing date, excluding from such elapsed

months

(A) the months in any year prior to the year in which he attained the age of twenty-two if less than two quarters of such prior year were quarters of coverage, and

(B) the months in any year any part of which was included in a period of disability except the months in the year in which such period of disability began if their inclusion in such elapsed months (together with the inclusion of the wages paid in and selfemployment income credited to such year) will result in a higher primary insurance amount.

Notwithstanding the preceding provisions of this paragraph when the number of the elapsed months computed under such provisions (including a computation after the application of paragraph (4)) is less than eighteen, it shall be increased to eighteen.

132

(2) An individual's "starting date" shall be

(B) if later, the last day of the year in which he attains the age of twenty-one,

whichever results in the higher primary insurance amount.183 (3) An individual's "closing date" shall be whichever of the following results in the higher primary insurance amount;

(A) the first day of the year in which he died or became entitled to old-age insurance benefits, whichever first occurred; or

130 P. L. 880-84th Congress, sec. 108, amended par. (3) in its entirety. For paragraph (3) as it read prior to this amendment see p. 268.

181 Sec. 101 (b) (1) of P. L. 85-840 added the phrase "For the purpose of column III of the table appearing in subsection (a) of this section," effective in the case of monthly benefits for months after December 1958, and in the case of lump-sum death payments with respect to deaths occurring after December 1958.

133 Sec. 115 (a) of the 1956 Amendments amended subsec. 215 (b) (1) in its entirety, effective after August 1, 1956, under the conditions and limitations set out in sec. 115 (d) of the 1956 Amendments, p. 209. See p. 268, for 215 (b) (1) as it read prior to the 1956 Amendments.

133 Special starting and closing dates for certain cases of death or entitlement to old-age benefits in 1956 are provided in sec. 102 (e) (6) of the 1954 Amendments, p. 195, and for certain cases of death or entitlement to old-age benefits in 1956 in sec. 110 of the 1956 Amendments, p. 208.

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