Kallick v. Commissioner

JOSEPH N. KALLICK, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT. Kallick v. Commissioner Docket No. 106357. United States Board of Tax Appeals 45 B.T.A. 992; 1941 BTA LEXIS 1045; December 10, 1941, Promulgated *1045 Petitioner maintained a home for himself and his widowed mother and contributed over one-half the cost of the mother's support. The mother owned no property, but received the sum of $710 in the taxable year as commissions on the sale of life insurance. She worked only several hours a day and not daily. She never applied for a full time position. Held, that petitioner is the head of a family under section 25(b)(1) of the Internal Revenue Code. Sidney C. Nierman, Esq., for the petitioner. Lester M. Ponder, Esq., for the respondent. ARVNDELL *992 The Commissioner determined a deficiency in petitioner's income tax for the year 1939 in the sum of $54.39. The single issue before the Board is whether or not petitioner is entitled to a personal exemption of $2,500 as the head of a family. Petitioner does not contest the Commissioner's disallowance of a credit for a dependent which petitioner claimed in his return for the taxable year. FINDINGS OF FACT. Petitioner is an unmarried individual and resides in Chicago, Illinois. His return for the taxable year was filed with the collector of internal revenue for the northern district of*1046 Illinois. Throughout the taxable year petitioner maintained an apartment in the South Side of Chicago in which he and his widowed mother resided. Petitioner has been employed since October 1934 by a mail order house located in Chicago. During the taxable year he was a buyer for the mail order house and earned the sum of $2,622. The nature of petitioner's work requires that he be out of town quite frequently and during the taxable year he spent an aggregate of no more than eight months in Chicago. While in Chicago he ate meals at home only several times a week. In the taxable year petitioner's mother was 50 years of age and was in a fair state of health. She was able to perform ordinary duties of housekeeping, had no extended illness, and was not mentally incapacitated. During the taxable year petitioner's mother had no property. She sold life insurance on a commission basis, most of her sales being made to friends and relatives in the course of social visits. She devoted a few hours a day, but not daily, to her occupation. She has never applied for a full time position. Her total compensation in *993 the taxable year was $710. Petitioner has an older sister*1047 who did not contribute anything to the support of petitioner's mother. No one other than petitioner contributed funds for the support of petitioner's mother. During the taxable year petitioner paid the following amounts in maintaining the home for his mother and himself: General household expenses $600 Rent [510] Gas and light [54] Telephone [70] Total 1,234 In addition to these amounts, petitioner gave his mother during the taxable year approximately $250, which, together with the $710 received from her insurance commissions, she devoted entirely to personal expenses. Petitioner's mother would not take a lengthy trip nor make a large purchase without petitioner's consent. Petitioner was the head of a family during the taxable year. OPINION. ARUNDELL: The sole issue for our determination is whether or not petitioner is entitled to a personal exemption as the head of a family under section 25(b)(1) of the Internal Revenue Code. Respondent has disallowed the exemption and claims that petitioner has shown himself entitled only to the personal exemption of $1,000 accorded single persons. He argues that the standards set forth in his regulations have*1048 the force and effect of law and that petitioner has not proved that he meets such standards. Respondent maintains specifically that petitioner did not actually support and maintain a dependent individual in the taxable year, that he did not possess the right to exercise control over his mother, that petitioner's mother was in good health and competent to earn her own living, and that the larger portion of petitioner's expenditures would have been made even if his mother had not resided with him. Respondent's regulation here applicable is section 19.25-4 of Regulations 103, which defines a 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." We have previously approved similar regulations interpreting earlier revenue acts. Alfred E. Fuhlage,32 B.T.A. 222 (art. 292, *994 Regulations 74, Revenue Act of 1928); *1049 Florence W. Hunt,35 B.T.A. 1042 (art. 302, Regulations 69, Revenue Act of 1926); Olive Ross,37 B.T.A. 928 (art. 292, Regulations 77, Revenue Act of 1932, and art. 25-4, Regulations 86, Revenue Act of 1934); Percy Wade,40 B.T.A. 328; affd., 117 Fed.(2d) 21 (art. 25-4, Regulations 94, Revenue Act of 1936). See also George A. Ohl, Jr.,45 B.T.A. 21, and Mary B. Adams,45 B.T.A. 193 (Revenue Act of 1938). Assuming the validity of respondent's regulation here under consideration, there remains for us to determine whether petitioner has qualified as head of a family under its standards. We are of the opinion that he has clearly shown himself to be entitled to the head of a family exemption. It seems clear that if petitioner's mother had been totally dependent, financially, upon petitioner and had been supported and maintained in his home, there would be little question of petitioner's status as head of the family. Annette Loughram,40 B.T.A. 252; *1050 William Lee Tracy,39 B.T.A. 578. Here, however, the mother of petitioner earned the sum of $710 in the taxable year from life insurance commissions. Petitioner expended the sum of $1,234 in the taxable year for mutual living expenses of himself and his mother, of which at least half may be attributable to her. The amount which petitioner contributed to his mother's support may be determined by adding to one-half of the mutual living expenses the sum of $250 which petitioner gave his mother for personal expenses. The sum of these two amounts, $867, represents the contribution which petitioner made for the support of his mother in the taxable year. Although respondent's regulation does not define the phrase "actually supports", several of his rulings have indicated taht the standard of support is satisfied where more than half of the support and maintenance of the dependent is furnished by the person claiming the exemption. O.D. 754, 3 C.B. 195; O.D. 775, 4 C.B. 214; G.C.M. 10431, XI-1 C.B. 37. We have held that the actual support requirement is met where the person claiming the exemption has contributed substantially, although*1051 not quite one-half, to the support of the dependent. Eleanor L. Mack,37 B.T.A. 1101. See Olive Ross,37 B.T.A. 928, 932. Thus, petitioner's contribution of $867 meets the criterion of support previously determined by us and by respondent. Respondent stresses the fact that petitioner's mother might have earned more in the taxable year if she had devoted more time to her occupation. He cites Richard H. Baumbach,42 B.T.A. 88, as authority for his argument that petitioner may not obtain the head of family exemption unless he proves that his mother could not have *995 earned more in the taxable year. We do not understand the Baumbach case to go so far. There the exemption was claimed by a father who actually maintained and supported a son "26 years old, in good health, a college graduate with a professional degree, and engaged in practicing his profession." We held that the taxpayer was not entitled to the exemption, stating: It is our opinion that the word "dependent" in the regulations can not properly be extended to a case like this where the individual is an adult, well educated, in good health, engaged in a profession, *1052 but simply fails to earn enough in his practice to fully support himself. In the cited case the son was clearly without the normal concept of a dependent. Here, however, the mother of petitioner was 50 years of age and, although in a fair state of health, had never applied for a full time position. We do not believe that a son should be required to have his mother attempt to perform full time work in order to determine whether he is entitled to the head of family exemption. Respondent also cites Louise Kingsley,11 B.T.A. 296. That case is clearly distinguishable from the instant proceeding, since there the taxpayer did not prove the amount devoted to the support of the alleged dependent. In Charlotte Hoskins,42 B.T.A. 117, we considered the question of a dependent under respondent's regulations regarding the head of family exemption and stated that "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." The quoted statement does not require a holding*1053 that petitioner's mother is not a dependent within the meaning of section 25(b)(1) of the statute. Petitioner certainly had a right to exercise control over his mother based on both a legal and a moral obligation. The statutes of Illinois confer on petitioner the duty to support his mother if she be unable to support hereself. Secs. 98.01 and 98.02, Jones Illinois Stat. Ann. Respondent has recognized the moral obligation of a son to support his parent. I.T. 3410, 1940-2 C.B. 85. Furthermore, the evidence presented at the hearing demonstrated that petitioner actually exercised a measure of control over his mother. We do not care to speculate as to what petitioner's living expenses would have been if he had not had his mother living with him. The materiality of such a fact is not clear. We hold that petitioner has brought himself within the intendment of the statute granting the head of family personal exemption. Decision will be entered under Rule 50.