Effective Dates: 11/21/2023 - Present Previous | Next

TN 30 (11-23)

RS 02505.060 Treatment of Royalties

CITATIONS:

Sec. 203(f)(5)(D)(i);
Regulations 404.429(b)(2)(i);
SSR 67-52 and SSR 75-19

A. PROCEDURE

1. Excluding Royalties From Gross SEI

For people who attain FRA in or before the TY, exclude from gross income from SE for such TY those royalties that are attributable to a copyright or patent obtained by the beneficiary before the taxable year in which the beneficiary attained FRA. This applies providing the property to which the copyright or patent relates was created by the beneficiary's own personal efforts.

2. Prohibition Against Using the SEI Exclusion Provision

Royalties may not be excluded from gross earnings under the SEI exclusion provision described in RS 02505.125.

3. When a Patent is Considered Obtained

Consider a patent obtained for earnings test purposes, the date the application was filed.

4. When a Copyright is Considered Obtained

a. Works created Prior to January 1, 1978

  • •

    Consider the copyright obtained for earnings test purposes, the date of publication if the work was published with notice of copyright (which is a claim of copyright).

NOTE:  If the work was published without a notice of copyright, copyright protection cannot be claimed at a later date.

  • •

    If the work was never published, consider the copyright obtained for earnings test purposes, the date an application was filed for copyright registration of the unpublished work or as of January 1, 1978, whichever is earlier.

b. Works Created On or After January 1, 1978

Consider the copyright obtained for earnings test purposes, the date of its creation; i.e., when the work was reduced to a fixed, tangible form such as a completed manuscript that is ready for submittal to the publisher.

Accept the beneficiary's allegation of when the copyright was obtained unless there is a good reason for questioning it.

B. EXAMPLES

NOTE: Examples 1 and 2 are before FRA applied.

Example 1:  

John, a retired author, becomes entitled in March 1986 at age 62. They receive $30,000 per year in royalties from books written and copyrighted in 1984. Their NESE for 1986 is $30,000 and none of it can be excluded because they are not age 65. Only those royalties received in or after the year of attainment of age 65 can be excluded. If John has nonservice months in 1986, they may be paid benefits under the monthly earnings test since 1986 is their initial grace year. However, benefits will not be payable for 1987 or 1988 because the monthly earnings test will no longer apply and the $30,000 royalties received each year cannot be excluded until the year they attain age 65. Royalties received in 1989 (the year they attain age 65) may be excluded under the provisions of the copyright law.

Example 2:

Mary, a writer, is not insured on their own record. They become entitled to widow's benefits at age 65 in September 1988. In 1989, Mary receives royalties of $30,000 from books written and copyrighted in 1987. The royalties can be excluded.

NOTE:  If the books had been copyrighted in 1988, the royalties could not be excluded under the provisions of the copyright law.

To Link to this section - Use this URL:
http://policy.ssa.gov/poms.nsf/lnx/0302505060
RS 02505.060 - Treatment of Royalties - 11/21/2023
Batch run: 11/21/2023
Rev:11/21/2023