Evening star., 1938-09-10
statesmen RULED
NOT EMPLOYEES
Test Case to Decide Status
on Security Taxes Based
on Contracts.

The Treasury Department. in two
test cases brought before it by the
National Association Of Real Estate
Boards, has ruled that statesmen OF
real estate companies in the cases
presented are not employees" for pur-
poses OF the taxes imposed under the
Federal Social Security Act.
The rulings were handed down in
the case OF the Walter w. Rose In
vestment Co. of Orlando, Fla, and
in the case of the Whitcomb &
Keller Mortgage Co. Of South Bend
Ind. In each case it has held that
the contract, together with the op-
Grating arrangement between the sales
man and the broker, establishes the
status of the salesman working for
the company as that OF an independent
contractor Statesmen Of the firms IN
question are compensated by sharing
in the commission collected.
The rulings are Of prime Importance
because they establish as outside the
le1uirement OF social security taxa
ton the statesmen Of any real estate
company operating under substantially
the same broker-salesman conditions
as the companies in question.
Unemployment = Question.
A primary reason why ruling was
sought: Real estate statesmen in the
very ordinary conditions set forth in
the test cases as a matter Of fact
could hardly hope to receive the bene-
fits OF unemployment insurance. The
ditficulty Is obvious. At what point
does a man working on such a basis
become unemployed?
1t is highly important for all real
estate firms to understand that the
exemption established is not blan-
ket exemption of all real estate sales
men working on commission basis,
the association points out through
George P. Ellis, its controller. THE
ruling is on type of contract and
operating arrangement between a real
estate Office and its statesmen which
creates an independent contractor re-
lationship rather than an employer
employe relationship. 1t furnishes a
plan which, If followed by other Of
fees. will enable them to qualify for
a like classification" Mr.. Ellis states.
Since the decisions do not give
a blanket exemption, N any Office
wishes to take advantage of the de-
cision 1t is quite necessary that its
contracts with its salesmen and the
vx-lt nh,
operate be substantially in accordance
with the contract and the facts set
out in the Rose case or the Whitcomb
IL Keller case. Otherwise they must
apply for a special exemption ruling
of the Treasury Department..
The broker-salesman contract is
actually the heart OF the matter"
Contract Reprinted in Freehold.
The Rose contract and the Treas
ury Departments decision based on 1t
are reproduced in full in Freehold,
magazine Of real estate, published by
the association, in its current issue.
Each Rose salesman signs a notarized
letter certifying that he understands
the terms and provisions of the con-
tract to be exactly as printed, the
article points out.
Also reproduced in Freehold's cur
rent issue, as a measure for real es-
tate nrms to use in determining
whether their present set-up qualities
them for exemption, is form SS-s,
the Treasury Department question:
naire, as answered by the Rose COM
pany.
One phase Of the whole question
important to the general public
brought out by this document: While
the contractual relationship of sales
men to the company in this test case
was that OF independent contracto
the company attested that its sales
men are required to follow its policies
IN so far as concerns honesty, obedi-
ence to the law, and refraining from
conduct which would injure the firms
good will, and it, of course, requires
them to follow instructions as to
terms of sale or other instructions
given by the owner of the property.
AS guidance for its members. the
association has placed in the hands
OF Its local member real estate boards
IN the principal cities of the country
reproductions of the entire correspond
ence with the Treasury Department in
connection with the Rose case.