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ESCOE v. SHALALA

January 15, 1994

RAPHAEL ESCOE, Plaintiff,
v.
DONNA SHALALA, Secretary of Health and Human Services, 1 Defendant.



The opinion of the court was delivered by: THOMAS J. MCAVOY

 MEMORANDUM-DECISION AND ORDER

 This matter was referred to Magistrate Judge Ralph W. Smith, Jr. for a report and recommendation pursuant to 28 U.S.C § 636(b) and Local Rule 44F. This action is brought pursuant to section 205(g) of the Social Security Act (Act), as amended, 42 U.S.C. § 405(g), to review a final determination of the Secretary of Health and Human Services (Secretary) denying plaintiff's application for retirement benefits. Briefs were filed by the parties in accordance with the Standing Order of May 4, 1988, letters were submitted to the court by the pro se plaintiff, and no oral argument was heard.

 The magistrate judge's Report-Recommendation, dated February 25, 1993, recommends that plaintiff's claim be dismissed. The plaintiff has filed objections addressing specific portions of the magistrate judge's Report-Recommendation. After examination of the objections, the court finds them to be without merit and adopts the report-recommendation of the magistrate judge.

 I. BACKGROUND

 A. Social Security Earnings Test

 Retirement insurance benefits are payable to individuals who have attained 62 years of age, are fully insured and have filed an application. 42 U.S.C. § 402(a). The Act, however, requires that such retirement benefits be reduced for claimants aged 62 to 70 who have excess earnings from wages or self-employment income in a taxable year. 42 U.S.C. § 403(f)(4)(A). More specifically, the Act provides, in pertinent part:

 
. . . 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 . . . 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.

 42 U.S.C. § 403(f)(4)(A).

 In 1991, the monthly amount of exempt earnings for retirement benefits was $ 810, or $ 9720 per year. See 42 U.S.C. § 403(f)(4)(D); 1991 Cost of Living Increases and Other Determinations, 55 Fed. Reg. 45,856 - 45,858 (Oct. 31., 1990). If the claimant's earnings exceeded that amount, $ 1 for every $ 3 of excess earning would be withheld from benefits due for those months in which the claimant was under the age of 70 and either worked for wages of more than $ 810 or rendered substantial services in self-employment. This is the so-called "earnings test".

 B. Facts

 Plaintiff was a self-employed dentist prior to his sixty-fifth birthday on March 5, 1991. His wife, Dorcas Escoe, worked with him as a part-time dental hygienist. (Rec. 16). According to his 1990 Federal Income Tax return, in 1989 his business grossed $ 200,203, netting $ 62,052. (Rec. 190). He and his wife filed a joint return and their income was commingled. (Rec. 16).

 On March 4, 1991, plaintiff and his wife purportedly signed a document entitled "Property Transfer and Contract" which provided the following:

 
For one dollar ($ 1.00) given me in hand and other good and valuable consideration: *fn2" I, Raphael Escoe, 88 Andrews Street, Massena, N.Y. 13662 sell my dental office at this address to Dorcas Escoe.
 
It is agreed as part of this transfer of property that Dorcas Escoe will run this office as office manager and practice her profession there. She agrees that under no circumstance will I be paid more than $ ...

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