*1369 The taxpayer is an incompetent who is unable to manage her finances and is physically unable to care for herself. She maintained no home and lived most of the time in a sanitarium. A committee which had been appointed to care for incompetent's property and person made certain monthly payments to children of incompetent pursuant to court orders. Held, incompetent is not entitled to a personal exemption as head of family under section 25(b)(1) of the Revenue Act of 1936; held, further, that amounts paid by the committee in connection with incompetency proceedings and pursuant to court order are not deductible from gross income of the incompetent.
*156 Respondent determined a deficiency in incompetent's income tax for the year 1937 in the sum of $637.04. The first issue is whether or not incompetent is entitled to a personal exemption in the taxable year as head of a family. The other issue is whether or not payments of expenditures incurred in connection with incompetency proceedings and other payments made pursuant to court order are*1370 deductible from incompetent's gross income.
*157 FINDINGS OF FACT.
Petitioners are the committee for the person and property of Annie Ratkowsky, an incompetent, hereinafter sometimes referred to as the incompetent. Incompetent is the mother of three daughters, Dorothy Reiber, Hilda Matz, and Estelle Ratkowsky, and twin sons, Milton and Irving Ratkowsky. (Estelle, Milton, and Irving Ratkowsky also go by the name of Rogers.) Incompetent has been divorced for many years.
Incompetent is afflicted with a serious mental disorder and is unable to take care of herself. She has elephantiasis and has great difficulty in walking.
Since 1920 incompetent has spent most of the time in various sanitaria. Her father, Banned Friend, occasionally took incompetent home from the sanitaria or to resorts.
When she was not in a sanitarium or away at a resort with her father, incompetent lived with her sons and daughters in a home on Ocean Avenue, Brooklyn, New York. The Ocean Avenue home was given up in 1929. From that time none of incompetent's children has lived with her. Incompetent's father did not live with her children but maintained a home of his own.
During his life*1371 Friend supported incompetent and looked after her. Incompetent had no other means of support. Her children also looked to Friend for financial assistance from time to time. In 1932 Friend died. He left bequests of $5,000 to each of incompetent's daughters and $2,500 to each of her sons. The bulk of Friend's estate was left to his four children.
After Friend's death the children of incompetent brought her to an apartment located on West End Avenue, New York, New York, which was selected by incompetent's sister, Mrs. Simon. Only a nurse lived with incompetent in the apartment. After approximately a year the apartment was given up and incompetent returned to a sanitarium. Since that date incompetent has remained in a sanitarium most of the time, although Mrs. Simon occasionally took her into her own home. The incompetent maintained no home during the taxable year.
The incompetent was never able to look after her own finances. In 1932, after the death of Friend, an inter vivos trust was established for the management of incompetent's inherited estate. Milton, Hilda Matz, and Joshua Edelman, an attorney, became trustees of this trust. Thereafter, whenever the children*1372 of incompetent were in need of funds they requested aid from the trustees. All checks were signed by the trustees. Incompetent never wrote checks on her account.
At the date of the hearing Dorothy Reiber was 35 years of age, Milton and Irving were 31, Hilda Matz was 30, and Estelle was 26. *158 In 1937 Milton and Estelle were the only children of incompetent who were unmarried.
Mrs. Reiber had not lived with other members of her family since approximately 1926. Estelle had lived at the Ocean Avenue home until that was given up in 1929. She lived with incompetent's father until his death in 1932. From that time until her marriage in 1938 or 1939 she lived with her sister, Dorothy Reiber.
Finally, four of the five children of incompetent brought legal proceedings to declare her incompetency. Incompetent's son, Milton, filed an answer to the petition and opposed the adjudication. The motivating cause of these proceedings was the refusal of the executors of the will of Friend to make any further distribution to incompetent or the trustees of the inter vivos trust unless so directed by a court order or until there had been an adjudication of her incompetency.
*1373 As a result of these proceedings the incompetency of Mrs. Ratkowsky was legally declared and a committee for her person and property was appointed. The committee consists of Douglass Newman, Irving Ratkowsky, and Hilda Matz. Newman was appointed special guardian for incompetent in 1936. He had an accounting with the trustees of the inter vivos trust of incompetent's estate and received checks for $4,736.57 and $1,051.86, representing the balance of funds held by the trustees for incompetent. On July 10, 1936, Newman received a check from the executors of the will of Friend in the sum of $5,463.32, representing income accumulated for slightly more than six months. At that time incompetent was entitled to receive the income from 50 percent of her father's estate. The estate of Friend still remains open. Incompetent and Mrs. Simon have life estates. The corpus of the estate upon the deaths of incompetent and her sister will go to Friend's grandchildren.
The following amounts were paid in 1937 in connection with the incompetency proceedings:
| Edelman & Edelman, attorneys - fees and disbursements | $3,101.32 |
| Dr. Perry M. Lichtenstein, psychiatrist | 300.00 |
| Dr. Rowland G. Freeman, psychiatrist | 200.00 |
| Dr. Menas S. Gregory, psychiatrist | 150.00 |
| Douglass Newman, special guardian, fee and disbursements | 1,504.04 |
| William M. Silverman, attorney for respondent | 131.30 |
| Dr. Samuel Atkins, psychiatrist for respondent | 75.00 |
*1374 Payments, pursuant to court order, were made from incompetent's estate in 1937 as follows:
| 1/13/37, committee commissions | $302.12 |
| 6/22/37, premium on bond for committee | 160.00 |
| 11/22/37, fee and disbursements of referee | 201.70 |
*159 The amounts for committee commissions, bond premium, and referee fee and disbursements were necessarily paid in connection with handling the funds of the incompetent.
After the appointment of the committee, the five children of incompetent brought a "Surplus Money Proceeding" for payments from surplus income of incompetent. The children alleged that they were not employed and had no other means of support and that they were about to become public charges. Hearings were held before a referee appointed by the court and a court order was entered directing the committee to make certain regular monthly payments to the five children from incompetent's surplus income. These payments have been continually made since that time.
The monthly payments in 1937 to the children were as follows:
| Dorothy Reiber | $80 |
| Estelle Ratkowsky | 35 |
| Irving Ratkowsky | 40 |
| Milton Ratkowsky | 25 |
| Hilda Matz | 60 |
In November 1937, *1375 pursuant to a court order entered upon application of the children, the monthly payments were increased to the following amounts:
| Dorothy Reiber | $105 |
| Irving Ratkowsky | 76 |
| Hilda Matz | 75 |
| Estelle Ratkowsky | 49 |
| Milton Ratkowsky | 35 |
On the income tax return filed for incompetent for the year 1937, a deduction in the sum of $9,148.10 was taken for amounts paid in connection with the incompetency proceedings and for payments from incompetent's estate after legal declaration of incompetency. Respondent disallowed the deduction. The exemption as a head of a family was not claimed in the return.
OPINION.
VAN FOSSAN: The fist issue for our determination is whether or not incompetent is entitled to a personal exemption as head of a family in the taxable year. The applicable provision of the statute is section 25(b)(1) of the Revenue Act of 1936.
Petitioners contend that, since incompetent supported her dependent children, and her right to provide for the children was based upon legal and moral obligations, she is entitled to the exemption. They maintain that, although incompetent did not support them within one household, force of circumstances required her*1376 to be separated from her family. Respondent argues that incompetent was *160 not in any sense a head of the family, since she spent most of the time after 1929 in various sanitaria and was physically and mentally incapable of looking after herself.
The statute does not define "a head of the family." Respondent's Regulations 94, article 25-4, 1 however, gives a definition of an individual who may be entitled to a personal exemption as a head of the family. We have considered this regulation and similar regulations under prior revenue acts and have held them to be a fair interpretation of the respective statutes. Charlotte Hoskins,42 B.T.A. 117">42 B.T.A. 117; Alfred E. Fuhlage,32 B.T.A. 222">32 B.T.A. 222.
*1377 In our opinion incompetent was not a head of the family within the meaning of the statute. She maintained no home in the taxable year. This is perhaps sufficient to deny the exemption. Florence W. Hunt,35 B.T.A. 1042">35 B.T.A. 1042. Further, it seems clear that an individual claiming the exemption must have a right to exercise family control. The legal proceedings in which Mrs. Ratkowsky's incompetence was declared deprived her of any right to exercise family control. Moreover, the incompetent was mentally incapable of exercising such control. Respondent is sustained on this issue.
The final issue is whether or not incompetent was entitled to a deduction from gross income of expenditures relating to the incompetency proceedings and other payments made pursuant to court order.
The incompetent was not engaged in a trade or business. The claimed deduction for expenditures, therefore, is not allowable on that ground. Commissioner v. Linderman, 84 Fed.(2d) 727; certioraridenied, 299 U.S. 589">299 U.S. 589; *1378 Van Wart v. Commissioner,295 U.S. 112">295 U.S. 112. The fact that an early office decision of the Bureau of Internal Revenue (I.T. 2238, C.B.IV-2, p. 49) was favorable to petitioners is not determinative. Higgins v. Commissioner,312 U.S. 212">312 U.S. 212. Moreover, petitioners have made no argument that there was a detrimental reliance on respondent's early ruling. We know of no ground on which the claimed deductions are allowable. Commissioner v. Linderman, supra.
Decision will be entered for the 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.