Baumbach v. Commissioner ( 1940 )

RICHARD H. BAUMBACH, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

Baumbach v. Commissioner

Docket No. 99895.

United States Board of Tax Appeals

42 B.T.A. 88; 1940 BTA LEXIS 1051;

June 14, 1940, Promulgated

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">*1051 HEAD OF FAMILY. - Petitioner is not the head of a family by reason of his maintenance of a son who was an adult, in good health, well educated, and engaged in the practice of a profession, but whose income from the profession was less than expenses.

L. J. Lautenschlaeger, Esq., and Harry P. Gamble, Jr., Esq., for the petitioner.

D. D. Smith, Esq., for the respondent.

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ARUNDELL

">*88 In this proceeding petitioner asks a redetermination of a deficiency of $157.53 in income tax for the calendar year 1937, which arises from the respondent's disallowance of a credit of $2,500 claimed by petitioner as the head of a family. In its place respondent has permitted the credit of $1,000 allowed an individual. The question is whether the petitioner, because of the support of his son, comes within the term "head of a family" and is thus entitled to the $2,500 credit allowed by section 25(b)(1) of the Revenue Act of 1936.

">*89 FINDINGS OF FACT.

The petitioner, a widower, resides at 4019 Octavia Street, New Orleans, Louisiana, at which address he has maintained a home since October 1936. Petitioner and his 26-year-old son, Edward, were the">*1052 sole occupants of the home during the taxable year 1937. Two other children, both older, were married and living elsewhere.

Edward, the son, attended Tulane University and spent four years at the Northwestern University Dental School, from which institution he was graduated with a dental degree in the year 1934. Petitioner financed the education of his son, and in the fall of 1934 aided him in establishing himself as a dentist in New Orleans. Edward shared a suite of offices with an older dentist, but treated only his own patients.

The son's gross income for 1937 was $925, consisting of fees amounting to $683 from the practice of his profession and $242 dividends. His office expenses exceeded his fees by $172.28. Petitioner rented the Octavia Street home and paid all the household expenses. The petitioner from time to time advanced money to the son for clothes, amusements, and other incidentals. The petitioner maintained an automobile that the son used with his permission.

Dental equipment had been purchased by the son on an installment basis in 1934, the total purchase price of $2,000 to be met by monthly payments over a three-year period. Petitioner made all the">*1053 payments for this equipment.

The son in 1937 owned 40 shares of corporate stock, worth $4,000, that he had acquired by gift from his father and an uncle. Aside from his dental equipment and the 40 shares of stock, the son owned no property.

The petitioner paid the living expenses of his son during 1937, in the aggregate $1,990.21, as follows: $1,002 representing one-half of the expense of house, meals, and servants paid for by the petitioner; $881.21 advanced to the son by checks, of which he used $400 to pay for dental equipment and the remainder for various living expenses, including commuting fares during the summer; and $100 advanced to the son in cash and used by him for miscellaneous expenses. No notes were given by the son to cover the advances made to or on his behalf by the petitioner. The petitioner expected that if the son became successful he would reimburse him for the amounts used to pay for office equipment. The son was in good physical condition in the taxable year.

The petitioner and his son resided at the New Orleans house maintained by the petitioner throughout the year 1937, except that during the summer they lived at Long Beach, Mississippi, in a house">*1054 also ">*90 maintained by the petitioner. The son had for a number of years resided thus in households maintained by the petitioner except while he was attending dental school in Chicago, and during that period he spent his holidays and vacations with the petitioner.

OPINION.

ARUNDELL: The petitioner claims a credit of $2,500 for the year 1937 under section 25(b)(1) of the Revenue Act of 1936. He claims that by reason of supporting his son in his household he was the "head of a family" within the meaning of that statutory term as it has been defined in article 25-4 of Regulations 94 as follows:

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.

Unquestionably the petitioner meets the majority of the elements enumerated in the regulation. He actually supported and maintained in one household an individual closely connected with him by blood relationship. There may be some question">*1055 as to the existence and extent of the petitioner's "right to exercise family control" over his adult son. We need not decide that. The regulation has for its main premise the maintenance by a taxpayer in one household of "dependent individuals." The question here thus narrows down to whether or not the petitioner's son was a "dependent." The son was 26 years old, in good health, a college graduate with a professional degree, and engaged in practicing his profession. Ordinaryily, we do not think of an adult who is mentally and physically sound as a dependent, and to so classify the son in this case would require an abrupt turn in common thought and speech. To hold that an adult individual under the facts here is a dependent would make that term applicable in a variety of situations that were surely not contemplated when the regulation was drafted. To carry the petitioner's view to its logical conclusion would be to say that every adult who continues to reside at the family abode and who does not earn in full a sum equal to his living expenses is a dependent, without regard to mental and physical capacity and the possibility of earning a living in another field of endeavor. Petitioner's">*1056 view would also involve the application of a highly variable standard, varying according to each individual's ideas as to the sum necessary for his proper support and maintenance.

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 ">*91 an adult, well educated, in good health, engaged in a profession, but simply fails to earn enough in his practice to fully support himself. The respondent's determination is sustained.

Decision will be entered for the respondent.