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Shore v. Califano

decided as amended february 8 1978.: December 12, 1978.



Before Seitz, Chief Judge, Garth, Circuit Judge and Wyzanski, District Judge.*fn*

Author: Garth


The question which we must answer on this appeal is: by what evidence may an applicant for Social Security retirement benefits prove that she had "self-employment income" for particular quarters during which no entries of income appear in the records of the Social Security Administration? The Act provides that:

the absence of an entry in the Secretary's records as to the self-employment income alleged to have been derived by an individual in such year shall be Conclusive . . . that no such alleged self-employment income was derived by such individual in such year unless it is shown that he filed a tax return of his self-employment income for such year before the expiration of the time limitation. . . .

42 U.S.C. § 405(c)(4)(C) (1976) (emphasis supplied). The district court gave no effect to this conclusive presumption, ruling that it could be overcome by evidence other than an actual tax return which was timely filed. We reverse.


The plaintiff, Shirley N. Shore, applied for retirement insurance benefits under Title II of the Social Security Act, 42 U.S.C. § 401 Et seq. (1970). On July 29, 1975, she was informed that her claim had been denied by the Social Security Administration because she was not a "fully insured individual" within the meaning of section 214(a) of the Act.*fn1 Under that provision, Shore must have had earnings of $100 or more during each of twenty-one calendar quarters; however, the records of the Social Security Administration showed that she had reported self-employment income in only sixteen quarters.

Thereafter, Shore filed a request for reconsideration of the Secretary's decision denying her claim. She alleged that she had "new and material evidence" which demonstrated that she was self-employed during 1951-1954 years in which the Secretary's records did not show any income for her. She asked that her earnings records be corrected to show that she had income in thirty-two quarters and was therefore a "fully insured individual."

The evidence submitted to the Social Security Administration included a statement by Shore that she had filed income tax returns for the four years in question but that she had misplaced her copies of those returns.*fn2 A letter from the IRS stating that it did not retain returns for years prior to 1968 was attached. Statements by her husband and his brother revealed that she was their partner in Shore's Photo Shop from 1951 to 1954. The accountants for the partnership stated that they had prepared the individual income tax returns for Mr. and Mrs. Shore for the years 1951 to 1954, and that the income which Mrs. Shore reported for those years was the same as her husband's. Copies of Schedule C-a (form 1040) filed by Mr. Shore showed that he had reported income in excess of $100 for each quarter of the four years.

After considering this evidence, the Social Security Administration refused to revise its original determination. The accountants' statements were not credited, because their "recollection of the particulars of accounting services that took place many years ago is not convincing evidence". The Secretary also took the position that self-employment income not shown in the agency's records may be proven only by "an actual tax return" timely filed for the year in question.

Shore's claim was then submitted to an administrative law judge for a decision based on the evidence in the file. On October 26, 1976, the administrative law judge concluded, as a matter of law, that Shore's evidence could not be considered and, therefore, denied her claims:

After the Secretary's decision had become final,*fn3 Shore brought this action in the Western District of Pennsylvania for review of that decision pursuant to 42 U.S.C. § 405(g) (1976). The case was referred to a magistrate, who concluded that the Secretary should have considered Shore's evidence of additional self-employment income during 1951-1954. He further concluded from a review of this evidence that the "plaintiff has proven by a preponderance . . . that she was self-employed during the period in question."*fn4 In an Order dated November 30, 1977, the district court denied the Secretary's motion for summary judgment, granted Shore's motion for summary judgment and directed the Secretary to award benefits to the plaintiff.

The Secretary has appealed from ...

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