UNPUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

GEORGE LAWRENCE FITZGERALD,
Plaintiff-Appellant,

v.
                                                                       No. 98-1218
KENNETH S. APFEL, COMMISSIONER OF
SOCIAL SECURITY,
Defendant-Appellee.

Appeal from the United States District Court
for the Western District of North Carolina, at Charlotte.
 Graham C. Mullen, District Judge.
(CA-96-525-MU)

Submitted: October 20, 1998

Decided: November 13, 1998

Before NIEMEYER, LUTTIG, and MICHAEL, Circuit Judges.

_________________________________________________________________

Affirmed by unpublished per curiam opinion.

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COUNSEL

George L. Fitzgerald, Charlotte, North Carolina, for Appellant. Mark
T. Calloway, United States Attorney, Joseph L. Brinkley, Assistant
United States Attorney, Charlotte, North Carolina, for Appellee.

_________________________________________________________________

Unpublished opinions are not binding precedent in this circuit. See
Local Rule 36(c).
OPINION

PER CURIAM:

George L. Fitzgerald appeals from the district court's order adopt-
ing the report and recommendation of a magistrate judge and granting
summary judgment to the Commissioner of Social Security
("Commissioner") in Fitzgerald's civil action for retirement benefits.
Because substantial evidence supports the denial of benefits, we
affirm.

Fitzgerald, born July 8, 1926, attained the age of 65 in 1991. He
is a licensed attorney who has been engaged in the practice of law in
North Carolina since 1955. In May 1991, Fitzgerald applied for retire-
ment benefits. Although found eligible, no benefits were paid because
Fitzgerald's continued employment resulted in excess earnings.

In September 1991, Fitzgerald incorporated his solo law practice,
designating himself as the corporation's president, treasurer and sole
shareholder and legal assistant as secretary. On November 5, 1991,
Fitzgerald informed the Social Security Administration ("SSA") that
he wanted his retirement checks to be issued monthly starting in Janu-
ary 1992, because his income for that year from his self-employment
would be less than the $8840 limit.

Fitzgerald began doing business under this new corporate structure
on January 1, 1992, and reported the corporation's existence to the
SSA in February 1992, indicating that no other attorneys were
employed by the corporation and that he would continue doing all of
the work for a salary of $850 a month. Corporate tax returns estab-
lished that the corporation grossed $202,507 in 1992 and $213,264 in
1993. The SSA informed Fitzgerald that for earnings test purposes, he
would be charged with his salary plus the ordinary income of his cor-
poration. On Fitzgerald's request for reconsideration, the SSA upheld
its initial determination denying benefits.

During the requested administrative hearing, Fitzgerald testified
that he incorporated his law practice after his 65th birthday and set
his salary below the allowed income limit in order to receive social

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security retirement benefits. Accordingly, the amount of his salary
bears no relation to the value of his services. Fitzgerald further testi-
fied that although currently able to declare corporate dividends, he
intends not to distribute any dividends, but to retain all profits and pay
out the lump sum upon attaining his 71st birthday. After the hearing,
the ALJ determined that Fitzgerald was not entitled to retirement ben-
efits. Though the Appeals Council granted Fitzgerald's petition for
review, it determined that Fitzgerald had no right to a hearing before
an ALJ because the suspension of benefits is not an initial determina-
tion that is subject to the administrative review process.

Subsequently, the SSA informed Fitzgerald that he had excess
earnings for 1992, 1993, and 1994. This determination was upheld on
reconsideration. On December 13, 1995, the ALJ found that Fitzger-
ald was not entitled to retirement benefits based on the amount of his
earnings. The Appeals Council denied Fitzgerald's request for review,
and the ALJ's decision became the final decision of the Commis-
sioner. Fitzgerald then filed a civil action in the district court. Both
Fitzgerald and the Commissioner filed summary judgment motions.
The district court accepted the magistrate judge's recommendation
and granted the Commissioner's motion for summary judgment on
the basis that substantial evidence supported the Commissioner's
decision to deny benefits.

On appeal, Fitzgerald contends that the Commissioner lacked
authority to reallocate undistributed corporate profits as his personal
wages for the purpose of computing excess earnings under 42
U.S.C.A. § 403 (West Supp. 1998), relying on Taubenfeld v. Bowen,
685 F. Supp. 237, 240-41 (S.D. Fla. 1988). We disagree.

We review the Commissioner's final decision to determine whether
it is supported by substantial evidence and whether the correct law
was applied.1 Substantial evidence is "`such relevant evidence as a
reasonable mind might accept as adequate to support a conclusion.'"2
As the presiding officer at the administrative hearing, the ALJ makes
_________________________________________________________________
1 See 42 U.S.C.A. § 405(g) (West Supp. 1998); Hays v. Sullivan, 907
F.2d 1453, 1456 (4th Cir. 1990).
2 Richardson v. Perales, 402 U.S. 389, 401 (1971) (quoting
Consolidated Edison Co. v. NLRB, 305 U.S. 197, 229 (1938)).

                     3
factual determinations and resolves evidentiary conflicts. We, as the
reviewing court, do not re-weigh evidence, make credibility determi-
nations, or substitute our judgment for that of the Commissioner.3

Qualified applicants who are eligible for retirement benefits are not
allowed to work or engage in self-employment that results in a yearly
income that exceeds a specified amount.4 The applicant has the bur-
den of rebutting the presumption of excess earnings. 5 The Commis-
sioner has the authority to examine the substance of business
transactions rather than its form and has the duty to pierce any ficti-
tious arrangements designed to shift salary payments.6 The Commis-
sioner's determination of an applicant's earnings"must be related to
the reality of his connection with the labor market and cannot be
based on paper allocation of income."7

We find that substantial evidence supports the Commissioner's
decision and that the ALJ applied the correct law. Fitzgerald had not
retired from the practice of law nor had he relinquished any of the
major managerial responsibilities of the corporation.8 There was no
decrease in his work activities. He worked the same number of hours,
earning the same rate of income for himself and the corporation while
drawing a disproportionately small salary that bore no relation to his
connection with the labor market.9 He hired no other attorney to take
_________________________________________________________________
3 See Smith v. Chater, 99 F.3d 635, 638 (4th Cir. 1996); Hays, 907 F.2d
at 1456.
4 See 42 U.S.C.A. §§ 402(a), 403(f) (West Supp. 1998).
5 See Johnson v. Chater, 127 F.3d 756, 758-59 (8th Cir. 1997) (citing
Martin v. Sullivan, 894 F.2d 1520, 1531-32 (11th Cir. 1990)).
6 See Heer v. Secretary of Health & Human Servs., 670 F.2d 653, 655
(6th Cir. 1982).
7 Martin, 894 F.2d at 1534.
8 See Perez v. Secretary of Health, Educ. & Welfare, 353 F. Supp. 1282
(D.P.R. 1972) (outlining criteria to determine if retirement has occurred,
which include amount of work actually performed after retirement and
whether another employee was hired to perform work no longer done by
retiree).
9 Fitzgerald admitted that his salary was structured below the allowable
earnings to maximize his eligibility for retirement benefits.

                    4
on any additional responsibilities. He retained complete decision-
making authority of the corporation as its president, treasurer, and
sole shareholder. Thus, we find sufficient evidence supports the Com-
missioner's determination that Fitzgerald had not retired and was
therefore not entitled to retirement benefits.

Fitzgerald's reliance on Taubenfeld is misplaced. In Taubenfeld,
while the duties of other family members within the retail clothing
corporation increased, the applicant curtailed his work hours, reduced
his salary, and resigned as president of the corporation.10 The court
found that although Taubenfeld was retired, he continued to contrib-
ute substantial services to the corporation. Yet, the corporation's
undistributed earnings could not be allocated to its retired president
because there was no evidence that the corporation was other than
bona fide; there was no intermingling of corporate and personal
funds, nor did Taubenfeld endeavor to run the corporation as a sole
proprietorship.11

We cannot, however, reach a similar conclusion in this appeal.
Fitzgerald was not retired. He continued to contribute substantial ser-
vices to the corporation and ran the business as if it were a sole pro-
prietorship. Although there was no evidence of commingled funds,
we find sufficient evidence supports the Commissioner's determina-
tion that Fitzgerald's corporation was not bona fide. Accordingly, the
Commissioner's decision to pierce this fictitious salary arrangement
and allocate the corporate earnings to Fitzgerald personally was also
supported by substantial evidence.

We therefore affirm the district court's order granting the Commis-
sioner's summary judgment motion. We dispense with oral argument
because the facts and legal contentions are adequately presented in the
materials before the court and argument would not aid the decisional
process.

AFFIRMED
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10 See Taubenfeld, 685 F. Supp. at 239.

11 See Taubenfeld, 685 F. Supp. at 240.

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