Kishner v. Commissioner

HARRY P. KISHNER, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT. Kishner v. Commissioner Docket No. 93434. United States Board of Tax Appeals 42 B.T.A. 456; 1940 BTA LEXIS 1004; July 31, 1940, Promulgated *1004 HEAD OF FAMILY - PERSONAL EXEMPTION CREDIT DENIED. - During 1936 and for several years prior thereto, petitioner resided in Chicago, Illinois, where he was engaged in the practice of law. His parents resided in Philadelphia, Pennsylvania, where they owned their own home. Petitioner was substantially the sole support of his parents during the taxable year. Held, there being no reasonable necessity for petitioner to maintain his parents in a separate household, petitioner was not the head of a family within the meaning of section 25(b), Revenue Act of 1936, and art. 25-4, Regulations 94. Harry P. Kishner, Esq., pro se. David Altman, Esq., for the respondent. HILL *456 This is a proceeding to review the determination by respondent of a deficiency in petitioner's income tax liability for the year 1936 in the amount of $60. The sole issue is whether or not petitioner *457 is entitled, under the provisions of section 25(b)(1) of the Revenue Act of 1936, to a personal exemption of $2,500 as the head of a family during the taxable year. FINDINGS OF FACT. Petitioner is an individual, and during 1936 resided in Chicago, Illinois, *1005 where he was engaged in the practice of law. Prior to July 1930 petitioner resided with his parents in Philadelphia, Pennsylvania. He paid no board or room rent to his parents. In the month last mentioned, petitioner went to Chicago to work for the law firm of Pennish & Rashbaum. Lewis E. Pennish, one of the partners of that firm, was the brother of petitioner's mother. In September 1930 petitioner began attending Northwestern University Law School at Chicago, and continued to work as clerk with his uncle's law firm. He received a salary of $20 per week during the years 1930 and 1931. Petitioner did not visit his parents in Philadelphia until August or September 1931, when he learned that his father had contracted an illness in the preceding January which so affected his eyesight that for a time he could not see. His father was unable to work, but received benefit payments and medical services from a fraternal organization during 1931 and 1932, and received free services of eye specialists in Philadelphia. Petitioner's uncle also contributed several hundred dollars to the support of petitioner's parents during 1931. Beginning in 1932, petitioner received approximately $50*1006 or $60 per month for accounting services performed for his uncle, and sent a part of such salary to his parents. In 1932 the uncle also contributed money for the support of petitioner's parents. In February or March 1934 petitioner was admitted to the Illinois Bar and continued to work for his uncle's law firm at an increased salary. His uncle then ceased making gifts to petitioner's family. During the year 1936 petitioner received a salary of $5,000, which amount he reported in his income tax return for that year. In the same year petitioner gave sums of money to his parents, of which he kept no accurate record. He introduced in evidence 15 checks dated in 1936 made payable to various persons, and also "cash" and "currency", in the total amount of $610. A portion of the proceeds of these checks was used for the benefit of petitioner's parents and a portion for his own personal expenses. In 1923 petitioner's parents purchased a small 6-room house in Philadelphia for $6,500, paying $500 down. There was a mortgage on the property for $6,000, which was substantially reduced thereafter by petitioner's father. During 1936 petitioner's parents probably could have sold their*1007 equity in the Philadelphia property for *458 approximately $500. The rental value of the home owned and occupied in 1936 by petitioner's parents was $30 per month. Petitioner's sister, Rose Kishner, resided with their parents during the year 1936, when she was 25 years of age. She was earning $15 per week, which she used entirely for her own expenses. She did not contribute to the support of her parents or for maintenance of the household, nor did she pay for room or board. During the taxable year petitioner was a citizen of the State of Illinois and voted in Chicago. He had and has no intention of leaving Chicago, but intends to remain there and practice his profession. Petitioner is a member of the Illinois Bar but is not a member of the Bar of Pennsylvania or of any other state. During the year 1936 petitioner's parents were in full possession of their mental faculties and were physically able to move to Chicago. Petitioner never established a common home for his parents with him in Chicago for the reason that the parents could live cheaper in Philadelphia. In his income tax return for 1936 petitioner claimed a credit of $800 for his parents as dependents, *1008 and a personal exemption of $2,500 as the head of a family, consisting of himself and his parents. Respondent allowed the $800 credit for dependents and allowed a personal exemption of $1,000 in lieu of the claimed exemption of $2,500. OPINION. HILL: The question for decision is whether or not petitioner is entitled to a personal exemption of $2,500 as the head of a family during the taxable year. The deficiency in controversy results from respondent's disallowance of such exemption. Section 25(b)(1) of the Revenue Act of 1936, the statute applicable here, provides, among other things, that a personal exemption of $2,500 shall be allowed as a credit against net income "in the case of a head of a family", but does not define the term "head of a family." Respondent has defined such term in his Regulations 94, article 25-4, quoted in the margin below. 1 *1009 *459 The quoted provisions of Regulations 94 are substantially the same as those contained in regulations issued under prior revenue acts, and we have repeatedly approved the language used as being a fair interpretation of the statutes and having the force and effect of law. ; ; . That petitioner in some respects meets the essential requirements of respondent's definition is at once apparent. By the allowance of the credits for dependents in the sum of $800 respondent concedes that petitioner's parents derived their principal support from him. Aside from their home (rental value $30 per month), undoubtedly petitioner was the principal if not sole support of his parents during the taxable year, and, of course, the dependents were "closely connected with him by blood relationship." However, respondent contends that petitioner does not qualify as the "head of a family" within the meaning of the statute and regulations, principally for the reason that he did not support and maintain his parents in one household with himself, but that*1010 without necessity the parents continuously made their home in Philadelphia while petitioner resided in Chicago. We think respondent's contention must be sustained. The quoted regulation does not require absolutely and under all conditions that a taxpayer and his dependents reside continuously in one household, but if separate homes are maintained, reasonable necessity therefor must appear in order to entitle the taxpayer to the personal exemption allowable to the "head of a family." That petitioner does not come within any of the exceptions mentioned in respondent's regulations is too obvious to require discussion, but the examples stated do not purport to be all-inclusive. We have had occasion to allow the exemption in other circumstances, where reasonable necessity appeared for the maintenance of separate homes. In , the petitioner's dependent mother was adjudged insane and committed to a state hospital by a court of competent jurisdiction. The state furnished the mother with food and medical treatment, but petitioner supplied all other necessities. We held petitioner entitled to the personal exemption allowable to the head of a*1011 family, saying: The regulations recognize that there need not be continuous, actual residence together if circumstances justify the separation and there is a necessity for continuously maintaining the dependent elsewhere. On substantially the same ground, we held in , that the taxpayer was the head of a family. There the petitioner, voluntarily separated from his wife, maintained two *460 homes, living in one alone while supporting and maintaining in the other his dependent wife and daughter, over whom he exercised family control. We concluded that the taxpayer was obliged through force of circumstances to maintain his dependent daughter with her mother, and thus came within the Commissioner's regulations. , is on principle a similar decision. There we held the taxpayer, a resident alien, was the head of a family where he maintained his aged mother in their home in England, notwithstanding be also maintained a residence in New York and spent about one-half of his time on business in this country. In *1012 , the decedent was supporting, maintaining and exercising family control over her niece by marriage, who was blind and wholly dependent on decedent for support. Because of the dependent's infirmity and the circumstances in decedent's home the dependent was of necessity maintained in a separate establishment provided by decedent. We held on the facts in that case that decedent was the head of a family within the meaning of section 25(b) of the Revenue Act of 1936 and entitled to a personal exemption of $2,500. The instant proceeding is distinguishable from the decisions above cited. Petitioner resided in Chicago and contributed money to the support of his parents in their own home in Philadelphia. It was more convenient and less expensive to do this than to establish and maintain his parents in a common home with himself in Chicago. Obviously, during the taxable year, when petitioner received a salary of $5,000, he was financially able to maintain a home for himself and his parents in Chicago commensurate with their standard of living, if he had desired to do so. And it is shown that the parents were mentally and physically*1013 able to move to Chicago. In our opinion, petitioner's desire to minimize expenses does not under the facts here constitute reasonable necessity within the meaning of article 25-4, supra, for supporting his parents in a home separate from his own. Moreover, it is not shown that petitioner exercised family control over his parents or their household. He did not even provide the home in which they lived. The evidence is clear that what he did, and all that he did, was to send money to his parents or pay their bills for living expenses. He was not in the taxable year the "head of a family" within the meaning of the statute and regulations; he merely contributed to the support of his dependent parents. Respondent's determination is approved. Decision will be entered for respondent. Footnotes 1. ART. 25-4. Personal Exemption of Head of Family.↩ - A head of a family is 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. In the absence of continuous actual residence together, whether or not a person with dependent relatives is a head of a family within the meaning of the Act must depend on the character of the separation. If a father is absent on business, or a child or other dependent is away at school or on a visit, the common home being maintained, the additional exemption applies. If, moreover, through force of circumstances a parent is obliged to maintain his dependent children with relatives or in a boarding house while he lives elsewhere, the additional exemption may still apply. If, however, without necessity the dependent continuously makes his home elsewhere, his benefactor is not the head of a family, irrespective of the question of support. * * *