Court Opinion

ID: 4600788
Source: CourtListenerOpinion
Date Created: 2020-11-20 19:26:18.635752+00
Date Added: 2024-06-11T07:52:22.017001
License: Public Domain

CHARLOTTE HOSKINS, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.Hoskins v. CommissionerDocket No. 96467.United States Board of Tax Appeals42 B.T.A. 117; 1940 BTA LEXIS 1048; June 18, 1940, Promulgated 1940 BTA LEXIS 1048">*1048  Petitioner, about 50 years of age, employed as a bookkeeper, maintained an apartment in which she and her adult niece, about 30 years of age, who had part time employment as a stenographer, lived.  Held, under the facts petitioner is not entitled to an exemption of $2,500 as "head of a family" under section 25(b), Revenue Acts of 1934 and 1936.  W. E. Baird, C.P.A., for the petitioner.  Gene W. Reardon, Esq., for the respondent.  ARNOLD42 B.T.A. 117">*117  This proceeding involves deficiencies in income taxes for the calendar years 1935, 1936, and 1937 in the respective amounts of 42 B.T.A. 117">*118  $43.85, $44.41, and $55.06.  The single issue presented as to each year is whether petitioner is entitled to a personal exemption of 2,500 as the head of a family.  FINDINGS OF FACT.  The parties stipulated and agreed that the facts are as follows: 1.  The petitioner, a single woman of about 50 years of age, was employed during the taxable years as a bookkeeper for the Standard Investment Company of Kansas City, Missouri, and her income was derived from salary and notary fees.  2.  In 1929 a niece, Miss Floy J. Elliott, then about 25 years of age, came from the1940 BTA LEXIS 1048">*1049  country to live with the petitioner and her brother for the purpose of attending a business college, and with a view of later obtaining a position.  The petitioner's brother married in 1932 and the petitioner and her niece continued to live together at 918 E.39th Street, Kansas City, Missouri, and were living together during the taxable years.  3.  The petitioner paid the niece's school expense and other expenditures, and in 1932 the unpaid balance thereof amounted to $926.04.  4.  The niece finished her business course in shorthand in 1930 and subsequently obtained employment, but could not keep herself employed all the time.  5.  During the taxable years the niece was approximately 30 to 33 years of age and was physically and mentally capable of self-support.  6.  The cash earnings of the niece were from unsteady employment in offices and amounted to approximately $325.00, $500.00, and $350.00 during the years 1935, 1936 and 1937, respectively, of which she paid the petitioner approximately $152.10, $212.24, and $159.00, respectively, in said years, and expended the balance of her earnings for personal expenses, such as carfare, lunches when employed, clothing, entertainment, 1940 BTA LEXIS 1048">*1050  etc.  The petitioner's memo book shows that the latter amounts of $152.10, $212.24, and $159.00 were applied against the niece's open account covering a period of years from 1929 to 1935, consisting of tuition, doctor bills, clothing and cash.  The said memo book discloses numerous erasures and the retracing of amounts.  7.  The niece did the greater part of the household work when unemployed, and helped in the household work at other times.  No cash remuneration was paid by petitioner to her niece for such services.  8.  During the years 1935, 1936 and 1937, petitioner and her niece lived together in an apartment and all the expenses, totaling approximately $935.00, $810.00, and $885.00, respectively, in said years, consisting of rent, utilities and food stuffs, were paid directly by petitioner.  9.  The petitioner claimed an exemption of $2,500.00 in her Federal income tax returns for the years 1935, 1936 and 1937, as head of a family, and the Commissioner reduced the amount to $1,000.00, the exemption allowed to a single person under the applicable revenue acts.  OPINION.  ARNOLD: Section 25(b) of the Revenue Acts of 1934 and 1936 allows a personal exemption for the purposes1940 BTA LEXIS 1048">*1051  of the normal tax and the surtax of $2,500 "in the case of the head of a family." No statutory definition is given as to what constitutes the "head of a family." 42 B.T.A. 117">*119  Respondent's regulations, article 25-4 of Regulations 86 and 94, define the head of a family as: * * * an individual who actually supports and maintains in one household one or more individuals who are closely connected with him by blood relationship, relationship by marriage, or by adoption, and whose right to exercise family control and provide for these dependent individuals is based upon some moral or legal obligation.  This definition has been considered and accepted by the Board as a fair interpretation of the statute and as having the force and effect of law.  ; ; petition to review dismissed, ; . The determination of the present issue, therefore, requires an application of this definition to the stipulated facts.  Petitioner contends that she qualifies under the above definition because she actually supported1940 BTA LEXIS 1048">*1052  and maintained her niece in one household, and that her right to exercise family control over and provide for such niece is based upon a moral obligation.  Petitioner further contends that the "dependent individuals" referred to in article 25-4 of the regulations is not the same as the dependents referred to in section 25(b)(2), which limits the $400 credit for dependents to persons under 18 years of age, or incapable of self support because mentally or physically defective.  In , we pointed out the three essentials necessary to establish the status of a head of a family as follows: 1.  Dependence, accompanied by actual support.  2.  Maintenance of the home.  3.  Close relationship by blood, marriage, or adoption in order that the right of the taxpayer to exercise family control and provide for such dependents shall be based upon some moral or legal obligation.  The stipulated facts show that this petitioner complies with at least a portion of all three essentials, since there was actual support in part, there was maintenance of a home, and there was a blood relationship in that the person living with petitioner was her niece.  In the 1940 BTA LEXIS 1048">*1053 Wade case the relationship was that of a second cousin, which we held was too remote.  But in , a niece was one member of a family maintained by the taxpayer in one household.  The factual difference between the niece in the Tracy case and here is that this niece was an adult, educated woman, while Tracy's niece was a minor under 18 years of age.  Petitioner concedes that she was under no legal obligation to support and maintain her niece, and rests her claim to the exemption upon the moral obligation imposed by their blood relationship.  She stresses, however, that it is the right to exercise family control which 42 B.T.A. 117">*120  she is required to establish, and not that the right was actually exercised.  The argument is not without weight, as we expressed a similar thought in , where we said that "The regulations only require that the taxpayer have a right to exercise family control and they do not require that he have the exclusive right." That case involved the support and maintenance of taxpayer's divorced wife and two minor children, and we held that his1940 BTA LEXIS 1048">*1054  right to exercise family control was sufficient to bring him within the definition of the head of a family. The cited cases, and others that might be cited, in which the taxpayer was held to be the head of a family, involve factual situations more favorable to the taxpayers therein than the situation here presented.  Ordinarily a family connotes a marital community, parent or parents and child or children.  We do not, as a rule, think of two adults living together as constituting a family unless one is legally obligated to support the other.  Cf. Certainly, this petitioner would have no standing here if her niece's earning capacity was equal to her own and the niece was bearing her pro rata portion of the living expenses.  We are being asked, therefore, to hold that for tax purposes a voluntary social and economic arrangement between two adult individuals shall be considered the equivalent of a family under section 25(b), one of whom is the head thereof.  We are unable to so hold.  Commendable and praiseworthy as petitioner's efforts were in behalf of her niece, we can not agree that there was any such dependency on the part of the adult1940 BTA LEXIS 1048">*1055  niece so as to entitle petitioner to classification as the head of a family.  True, this petitioner carried the burden of maintaining and providing a living and quarters for both, but this fact does not entitle petitioner to classification as the head of a family.  Her right of control went to the living she would provide and the quarters she would furnish.  Petitioner could exercise no control over her niece except through the latter's gratitude for her aunt's generosity.  Dependency under the definition goes further than economic convenience; it speaks in terms of people incapable of supporting themselves because of infancy, senility, mental incompetence, physical incompetence, and like or similar circumstances.  Cf. . Economic factors in recent years have made many able-bodied, intelligent persons dependent upon the generosity of others, but these conditions did not make the donor the head of a family within the meaning of section 25(b)(1) and article 25-4, Regulations 86 and 94.  Decision will be entered for the respondent.