Rev. Rul. 54-208

Advice is requested as to the scope of the term `funeral director' as it is used in the Self-Employment Contributions Act, section 481(c)(5) of the Internal Revenue Code. For taxable years beginning after December 31, 1950, section 480 of the Code imposes a tax upon the self-employment income of every individual. Self-employment income, in general, consists of the net earnings derived by an individual (other than a nonresident alien) from a `trade or business' carried on by him as sole proprietor or by a partnership of which he is a member, subject to certain exclusions, exceptions, and limitations.

For purposes of such tax, section 481(c)(5) of the Code excludes from the term `trade or business' the performance of services by an individual in the exercise of his profession as a funeral director. However, the performance of these services by an individual cannot constitute the exercise of such excluded profession unless the individual meets the legal requirements, if any, for the practice thereof in the place where the services are performed. Furthermore, the statutory designation of the term `funeral director' is to be given its commonly accepted meaning. See Regulations 118, section 39.481-3; Rev. Rul. 276, C.B. 1953-2, 88.

Generally this term is understood to refer to one who is responsible for making and carrying out all of the necessary arrangements for funerals. In connection with the practice of his profession, a funeral director may perform services not in themselves so excluded such as the reporting of deaths, the procurement of permits required by law, the procurement of certified copies of death certificates, the removal and transportation of bodies for embalming processes, the embalming of bodies, and the sale of caskets, vaults, and shrouds. But since each of these activities is a normal extension of the exercise of the profession of funeral director, and can reasonably be embraced therein, all of them will be regarded as an incidence of the practice of such profession and, hence, the net earnings therefrom will be exempt from the tax on self-employment income.

On the other hand, if one who practices the profession of funeral director also engages in an enterprise which is not incidental thereto, such as the operation of an ambulance service, a furniture store, or a florist shop, the net earnings from each must be segregated and only those attributable to such profession can be exempt from the tax on self-employment income. See Rev. Rul. 275, C.B. 1953-2, 86.