Court Opinion

ID: 4474674
Source: CourtListenerOpinion
Date Created: 2020-01-16 21:11:05.358173+00
Date Added: 2024-06-11T14:51:01.331829
License: Public Domain

Gale, J., concurring: While I agree with the result reached in the principal opinion, I believe that, given the very narrow facts of this case and the opacity of respondent’s position, it should be resolved in petitioner’s favor on the basis that she is entitled to the benefits of Rev. Rul. 66-28, 1966-1 C.B. 31. In that ruling, the Commissioner, on analogous narrow facts, treated an absence from the household as a “temporary absence due to special circumstances” without regard to whether it was reasonable to assume that return would occur. In Rauenhorst v. Commissioner, 119 T.C. 157, 170-173 (2002), we refused to allow counsel for the Commissioner “to argue * * * against the principles and public guidance articulated in the Commissioner’s currently outstanding revenue rulings.” I conclude that respondent’s position in this case is sufficiently at variance with the principles of Rev. Rul. 66-28, supra, that petitioner should be permitted to rely on the ruling, given respondent’s failure to address the ruling and distinguish it. Rev. Rul. 66-28, 1966-1 C.B. at 32, is longstanding public guidance in which the Commissioner, following this Court’s decision in Hein v. Commissioner, 28 T.C. 826 (1957), ruled that a “temporary absence due to special circumstances” (as used in the dependency exemption regulations at section 1.152-l(b), Income Tax Regs.) encompassed an extended stay in a nursing home notwithstanding the “possibility or probability” that death would preclude a return to the household. In Hein v. Commissioner, supra, this Court had construed a “temporary absence due to special circumstances” (as used in a predecessor of the head of household regulations presently at section 1.2-2(c)(l), Income Tax Regs.1) to include an extended confinement in a sanatorium due to mental and physical illness, even though the prospects of recovery and return to the household were minimal. The Commissioner had contended in Hein that, given the claimed household member’s advanced age and poor recovery prospects, her confinement was not a temporary absence because it was unreasonable to assume that she would return, presumably relying on the provision, now codified in section 1.2-2(c)(l), Income Tax Regs., which provides that an absence will be disregarded “if * * * it is reasonable to assume that the taxpayer or * * * [other household occupant] will return to the household”. This Court refused to apply a reasonable assumption of return standard in the case of a dependent who was absent due to an extended illness, concluding instead that in these circumstances “the true test is not whether the return may be prevented by an act of God, but rather whether there are indications that a new permanent habitation has been chosen.” Hein v. Commissioner, supra at 835. The Commissioner subsequently acquiesced in Hein, 1958-2 C.B. 3, and then, in 1966, adopted it in a revenue ruling. In Rev. Rul. 66-28, 1966-1 C.B. at 32, the Commissioner, relying on Hein, ruled that “confinement” to a nursing home due to illness would be considered a “temporary absence due to special circumstances” for purposes of the dependency exemption regulations (section 1.152-l(b), Income Tax Regs.), notwithstanding the extended length of the absence or the probability, given the dependent’s age and condition, that return would not occur: In view of the decision in the Hein case, a period of time during which a dependent is confined to a nursing home because of illness will likewise be considered a temporary absence due to special circumstances for the purpose of section 152(a)(9) of the Code, even though such absence is for an extended period of time. There must, of course, be an absence of an intent on the part of the taxpayer and the dependent to change the dependent’s principal place of abode. The possibility or probability that death might intervene before the dependent returns to the taxpayer’s household is not sufficient to make such absence permanent. [1966-1 C.B. at 32.] The Commissioner in Rev. Rul. 66-28, supra, thus eschewed reliance on any reasonable assumption of return standard in the case of absences due to extended illness and instead emphasized the absence of intent on the part of the taxpayer or dependent to change the dependent’s place of abode. As the dissenting opinion points out, the “temporary absence due to special circumstances” provisions in the head of household regulations addressed in Hein contain the requirement that it be “reasonable to assume that the [absent] taxpayer or * * * [absent occupant of the taxpayer’s household] will return to the household”, whereas the “temporary absence due to special circumstances” provisions in the dependency exemption regulations construed in Rev. Rul. 66-28, supra, contain no such provision. The dissenting opinion argues that this distinguishes Rev. Rul. 66-28, supra, from the instant case, which involves the head of household regulations. I disagree. There is no indication in Rev. Rul. 66-28, supra, that the Commissioner was seeking to distinguish the rules applicable to temporary absences due to illness in the case of the dependency exemption regulations versus the head of household regulations. To the contrary, the ruling characterizes the two regulations as “identical”, thereby minimizing the significance of the reasonable assumption of return clause contained in one of them — at least in the case of absences due to extended illness. I believe the fair reading of Rev. Rul. 66-28, supra, is that the Commissioner decided, in the case of absences due to extended illness, to apply the Hein test of intent and give little or no weight to any reasonable assumption of return, whether for purposes of the dependency exemption regulations or the head of household regulations. Rev. Rul. 66-28, supra, has stood unmodified for more than 40 years and is now recognized by Congress as part of the present law defining eligibility for the dependency exemption, head of household filing status, and the earned income credit (the rules for which incorporate the head of household standards). For example, the description of the present law concerning the dependency exemption contained in H. Conf. Rept. 108-696, at 56 (2004), states: A taxpayer or other individual does not fail to be considered a member of a household because of “temporary” absences due to special circumstances, including absences due to illness, education, business, vacation, and military service. * * * Indefinite absences that last for more than the taxable year may be considered “temporary”. For example, the IRS has ruled that an elderly woman who was indefinitely confined to a nursing home was temporarily absent from a taxpayer’s household. Under the facts of the ruling, the woman had been an occupant of the household before being confined to a nursing home, the confinement had extended for several years, and it was possible that the woman would die before becoming well enough to return to the taxpayer’s household. There was no intent on the part of the taxpayer or the woman to change her principal place of abode.42  Consistent with the approach in Rev. Rul. 66-28, supra, the report also treats the principles of the ruling as equally applicable for dependency exemption, earned income credit, and head of household purposes. Elsewhere in the same discussion of present law, the report describes the residency test for the earned income credit as follows: The residency test is satisfied if the individual has the same principal place of abode as the taxpayer for more than one half of the taxable year. * * * As under the dependency exemption (and head of household filing status), temporary absences due to special circumstances, including absences due to illness, education, business, vacation, and military service are not treated as absences for purposes of determining whether the residency test is satisfied. * * * [H. Conf. Rept. 108-696, supra at 58; emphasis added.] That is, the test for temporary absence due to special circumstance in the case of the earned income credit is the same “as under the dependency exemption (and head of household filing status)”; nowhere is it suggested that the test of temporary absence for purposes of head of household filing status and the earned income credit is more stringent than, or otherwise different from, the test applied for purposes of the dependency exemption. To the same effect, see S. Rept. 108-257, at 81 (2004); H. Rept. 108-126, at 181 (2003); Jt. Comm, on Taxation, General Explanation of Tax Legislation Enacted in the 108th Congress, at 120 n.199 (J. Comm. Print 2005). The Commissioner, then, has issued widely recognized public guidance in which he equates the temporary absence provisions of the dependency exemption and head of household regulations, and indicates that at least in certain narrow circumstances little or no weight will be given to the reasonable assumption of return provision. Respondent’s position in this case is far from clear. The case was submitted without briefs, and the only argument respondent advances to support his conclusion that petitioner fails to satisfy the residency test is as follows: Respondent’s position is that sharing of the same principal place of abode requires that a “qualifying child” live with the taxpayer for more than one-half of the taxable year. The test is a “simple residence test” that bases eligibility on whether the taxpayer lived with her child for more than six months of the taxable year. Sherbo v. Commissioner, 255 F.3d 650, 654-55 (8th Cir. 2001). Petitioner and her children could not have lived together for more than half of the year because petitioner was in state custody for more than half of the 2002 taxable year. Respondent does not even address the “temporary absence due to special circumstances” provision of the head of household regulations, let alone the reasonable assumption of return clause therein or Rev. Rul. 66-28, supra. Thus, I do not know whether respondent’s position is that a parent’s pretrial incarceration does not constitute a “temporary absence due to special circumstances” since it is not among the listed circumstances in the regulation, or that petitioner’s incarceration, though concededly a special circumstance, is nonetheless disqualifying because it was not reasonable to assume that petitioner would return. What is known about the Commissioner’s position is that he has extended Rev. Rul. 66-28, supra, in Service Center Advice to cover a child’s pretrial and postconviction incarceration. In Service Center Advice 200002043 (Jan. 14, 2000), the Commissioner advised whether a child’s detention in a juvenile facility for a potentially extended period would qualify as a temporary absence due to special circumstances within the meaning of section 1.2-2(c)(l), Income Tax Regs, (and, consequently, for purposes of eligibility for the earned income credit). The Advice concludes: “Detention in a juvenile facility pending trial is a temporary absence * * * due to special circumstances if there is no intent on the part of the taxpayer and child to change the child’s principal place of abode.” Explaining the conclusion, the Advice states: Detention in a juvenile facility pending trial can be a temporary absence notwithstanding the possibility that the child may be detained after the trial for an extended period of time in a juvenile facility. As indicated by the Hein case and Rev. Rul. 66-28, the length of the person’s absence from the household does not, by itself, determine whether the absence is temporary. What is determinative is whether there is any intent to change the principal place of abode. [Emphasis added.] The Commissioner thus treated as virtually self-evident the application of the principles of Hein and Rev. Rul. 66-28, supra, to an incarceration scenario (albeit of a child rather than an adult). The Commissioner’s application of Rev. Rul. 66-28, supra, to a juvenile incarceration included the principle that it is the existence of any intent to change the principal place of abode that is “determinative” in this particular circumstance.2 While it is recognized that informal guidance such as a Service Center Advice does not bind the Commissioner as a revenue ruling does under Rauenhorst v. Commissioner, 119 T.C. 157 (2002), such informal guidance is relevant in determining the scope of the principles in a revenue ruling. See id. at 173 n.12. In these circumstances, absent a reasoned argument from respondent that might distinguish Rev. Rul. 66-28, supra, I do not believe respondent should be permitted to maintain the position he has taken in this case. Under Rauenhorst, I believe petitioner is entitled to rely on Rev. Rul. 66-28, supra, wherein the Commissioner attributed little or no weight to the reasonableness of an assumption of return. The analogies between the facts of this case and those of Rev. Rul. 66-28, supra, are close. Absences due to extended illness or pretrial incarceration share significant similarities. Both absences are essentially involuntary. Moreover, both create particular difficulties in applying the reasonable assumption of return clause of the regulations. In the case of extended illness, applying the reasonable assumption of return standard requires the tax administrator to engage in a medical prognosis that is difficult and perhaps unseemly. In the case of pretrial incarceration, such application requires the tax administrator to speculate about the outcome of the criminal process in a manner that may be inconsistent with the presumption of innocence. Limiting this case narrowly to its circumstances involving an unconvicted taxpayer who is incarcerated awaiting trial, I am satisfied with the principal opinion’s finding that petitioner had not, as of the close of 2002, evidenced any intent to change households. Accordingly, under the principles of Rev. Rul. 66-28, supra, petitioner is entitled to treat her absence as “temporary * * * due to special circumstances” within the meaning of section 1.2-2(c)(l), Income Tax Regs. Thornton, J., agrees with this concurring opinion.   The predecessor regulation was at sec. l.l-2(c) of the regulations under the Internal Revenue Code of 1954 and earlier at sec. 39.12-4(e) of Regulations 118 under the Internal Revenue Code of 1939. The regulation has at all times contained the following language: The taxpayer and such other person [i.e., other occupant of the taxpayer’s household] will be considered as occupying the household for such entire taxable year notwithstanding temporary absences from the household due to special circumstances. A nonpermanent failure to occupy the common abode by reason of illness, education, business, vacation, military service, or a custody agreement under which a child or stepchild is absent for less than six months in the taxable year of the taxpayer, shall be considered temporary absence due to special circumstances. Such absence will not prevent the taxpayer from being considered as maintaining a household if (i) it is reasonable to assume that the taxpayer or such other person will return to the household * * *.    Rev. Rul. 66-28, supra, 1966-1 C.B. 31.    Notably, the Commissioner also treated this “determinative” aspect of Rev. Rul. 66-28, 1966-1 C.B. 31, as applicable in interpreting sec. 1.2 — 2(c)(1), Income Tax Regs., without regard to the fact that Rev. Rul. 66-28, supra, construed sec. 1.152-l(b), Income Tax Regs.