*226 Decision will be entered for the respondent.
1. In the taxable years 1943 and 1944, petitioner William I. Connelly, a Government employee holding a classified civil service position, was enrolled as a temporary member of the Coast Guard Reserve, with a rank or rating of Lieutenant Commander, and later, Commander. The certificate under which he was enrolled stated he was to serve without pay and allowances other than the compensation of his civilian position. Held:
(a) Petitioner was not a commissioned officer of the Coast Guard Reserve entitling him to a tax exclusion of $ 1,500 in the respective taxable years, within the purview of section 23 (b) (13), I. R. C., as amended by the Revenue Act of 1945.
(b) Petitioner is not entitled to deduct the sum of $ 2,171.10 in the taxable year 1944 as allowance for subsistence and quarters.
2. Medical expenses in excess of 5 per cent of net income claimed are properly adjusted on restoration to gross income of the disallowed exclusions.
*848 This proceeding involves income tax deficiencies for the taxable years 1943 and 1944 in the respective amounts of $ 433.59 and $ 227.10. The issues are: (1) Whether petitioner William I. Connelly is entitled to exclude from income received from the United States Coast Guard the amount of $ 1,500 for each of the taxable years 1943 and 1944 under the provisions of section 22 (b) (13) of the Internal Revenue Code, and (2) whether said petitioner is entitled to deduct from income received from the United*228 States Coast Guard for the taxable year 1944 the amount of $ 2,171.10, which represents the allowance for quarters and subsistence of a regular commissioned officer in the United States Coast Guard Reserve.
The case was submitted on a partial stipulation of facts, oral stipulations, oral testimony, and exhibits. We incorporate as findings all the stipulated facts. Facts found which were not stipulated are found from the evidence.
FINDINGS OF FACT.
The petitioners are husband and wife and reside in Falls Church, Virginia. Their returns for the taxable years involved were filed with the collector of internal revenue for the district of Virginia. For many years prior to February 19, 1943, petitioner William I. Connelly (hereinafter referred to as "petitioner") was a civil service employee of the United States. On March 1, 1942, petitioner became an employee *849 of the United States Coast Guard under the provisions of a reorganization executive order (E. O. 9083) in the capacity of senior attorney, grade P-5, and thereafter performed legal duties in the capacity of chief, admiralty and maritime section, legal division, Coast Guard Headquarters. On February 19, 1943, under *229 section 207 of the Coast Guard Auxiliary and Reserve Act of 1941, as amended by the Act of November 23, 1942 (U. S. C. Title 14, sec. 307), petitioner was enrolled as a temporary member of the Coast Guard Reserve for the duration of the war, with the rank of Lieutenant Commander. He was ordered to full time active special duty at Coast Guard Headquarters, without pay other than the compensation of his civilian position. While on active duty, petitioner was vested with all the rights, privileges, powers, and duties of a regular member of the Coast Guard Reserve of the same rank, and was subject to all laws and regulations for the government of the Coast Guard and its reserve. Petitioner was not exempt from liability for training and service under the Selective Training and Service Act of 1940, as amended. During the period of his enrollment petitioner continued to receive for his services and the duties assigned to him compensation from Congressional appropriations allocated to pay for civilian positions. Deductions for civil service retirement were continued and petitioner was still governed by civil service regulations for annual and sick leave and received overtime pay for work*230 in excess of 40 hours per week. The memorandum of enrollment, dated February 19, 1943, was from the Commandant of the Coast Guard to petitioner and was signed by "A. G. Merrill, By direction."
On April 21, 1944, petitioner's civil service position was reclassified from grade 5 to grade 6, effective March 16, 1944. It was recommended by Chief Counsel, United States Coast Guard, to Chief, Temporary Reserve Division, that petitioner be promoted to the rank of Commander (class T), to rank as such from March 16, 1944, which action would be in accordance with the two conditions set forth in the Commandant's memorandum of March 10, 1944, pertaining to the promotion of members of the temporary Reserve Headquarters, who are also civilian employees. On April 24, 1944, petitioner was disenrolled as Lieutenant Commander (class T), effective as of March 15, 1944, and reenrolled in the rank of Commander (class T), Coast Guard Reserve, effective as of March 16, 1944.
The certificate, headed "Temporary Member of Coast Guard Reserve Enrollment and Active Duty Assigned," inter alia, stated:
2. The period of your enrollment shall be for the duration of the war upon the completion of which you*231 will be disenrolled unless the period of your enrollment is sooner terminated by Coast Guard authority.
*850 3. You will perform such duties as may be prescribed from time to time by Coast Guard authority in the classification checked below:
* * * *
5. (x) Coast Guard Civil Service Employees.
* * * *
You are authorized to wear the prescribed uniform only while on active duty and while en route to and from such duty. * * * Members in Classifications 4 and 5 will be on active duty and subject to call at all times. * * *
4. Your military status as a member of the U. S. Coast Guard Reserve shall attach during periods when you are actually engaged on active duty or en route to and from such duty. In the performance of your duty as a temporary member of the United States Coast Guard Reserve, you are vested with the same power and authority as members of the regular Coast Guard of similar rank, grade or rating. You shall be subject to the laws, regulations and orders for the government of the Coast Guard and to disciplinary action for offenses committed while subject thereto, in accordance with the provisions of Section 209 of the Coast Guard Auxiliary and Reserve Act of 1941, as*232 amended.
5. You will serve without pay and allowances (other than compensation of their civilian positions in the case of Government employees), except (1) such travel and subsistence allowances as may be specifically authorized and (2) uniform allowances of: None.
6. You are not by reason of enrollment as a temporary member of the Reserve exempt from registration and liability for training and service under the Selective Training and Service Act.
7. You will be entitled to the following benefits and privileges only: (a) In the case of physical injury in line of duty while performing active Coast Guard service, or death as a result of such physical injury, the benefits prescribed by law for civil employees of the United States, as administered by the United States Employees' Compensation Commission, to the extent that the same may be applicable. (b) In the case of sickness or disease contracted while performing active duty, the same hospital (including medical but excluding dental) treatment as is afforded members of the regular Coast Guard. (c) Such other benefits and privileges as may be specifically authorized from time to time for temporary members of the Reserve or classification*233 thereof by law or regulations.
8. You are hereby ordered, upon acceptance of this enrollment and execution of the prescribed oath, to commence active duty at Legal Division at U. S. Coast Guard Headquarters.
in accordance with the above terms and conditions, effective 24 April, 1944.
On September 15, 1945, petitioner was disenrolled as a temporary member of the Coast Guard Reserve. The original disenrollment form issued by Coast Guard Headquarters to petitioner stated the reason for disenrollment was "For his own convenience" and that the type of service was "Coast Guard Civil Service Employee, without military pay." Petitioner filed a written protest specifically objecting to the description of "Record of Service." Later another disenrollment was issued to petitioner stating the reason for disenrollment was "Completion of service because of satisfactory completion of assigned duties." The type of duty performed was "Chief of Admiralty and Maritime Section having civil service status, receiving civilian but *851 no military pay, and holding rank of Commander as a Temporary Member of the Coast Guard Reserve." There is only one Coast Guard Reserve and it is composed of regular*234 and temporary members. Petitioner received total civilian pay from the Coast Guard for the year 1943 in the amount of $ 5,872.04 and for the year 1944 in the amount of $ 5,802.08.
In their income tax returns for the years 1943 and 1944, the petitioners claimed, as an exclusion from the income of petitioner William I. Connelly, the annual allowance of $ 1,500 provided by law for military and naval personnel, which was disallowed by the respondent; and for the year 1944, they claimed an additional exclusion of $ 2,171.10 as allowance for quarters and subsistence, which the respondent also disallowed.
In their 1943 return petitioners claimed that their medical expenses for that year exceeded 5 per cent of the net income for the period by $ 134.65. The respondent disallowed $ 75 of that amount, asserting that the amounts restored to income by the disallowances aforesaid required that disallowance also. It was stipulated that if the amounts were properly restored to income then the disallowance of $ 75 is proper; but if said amounts were improperly restored to income the disallowance of this item is improper.
OPINION.
The primary issue is whether the respondent correctly determined *235 that petitioner is not entitled to the exclusion of $ 1,500 in each of the taxable years under the provisions of section 22 (b) (13) (A) of the Internal Revenue Code, as amended by section 141 (a) of the Revenue Act of 1945. By section (b) of that act subsection (A) is made applicable to taxable years beginning after December 31, 1942, and (B) is made applicable to the years beginning after December 31, 1940. 1
*236 The argument of the petitioner is almost entirely devoted to attempting to prove that he was "in the military or naval forces of the United *852 States during such war." We think the issue is much narrower. Unless the petitioner was a "commissioned officer (or commissioned warrant officer)" in such forces, he is clearly not entitled to the benefits of such section. Congress has limited the $ 1,500 exclusion to persons rendering active service in the military and naval forces who meet the well defined specified classes. Statutes granting tax exemptions must be strictly construed in favor of the Government. Bank of Commerce v. State of Tennessee, 161 U.S. 134">161 U.S. 134. Petitioner's own testimony rather conclusively establishes that he was not a commissioned officer in the Coast Guard Reserve. On cross-examination he testified as follows:
Q. I believe you stated that you applied for a commission in the United States Coast Guard Reserve.
A. That is right.Q. Prior to being enrolled?A. That is right.Q. And you were not commissioned in the United States Coast Guard Reserve?
A. I never received a commission from the Coast Guard as a commission is commonly*237 classified. I did receive this so-called certificate of enrollment which I was led to believe was the substitute for the commission.
Petitioner was enrolled as a temporary member of the Coast Guard Reserve without military pay. Provision for such enrollment was authorized by Act of Congress. See ch. 9, Title 14, sec. 307, United States Code Annotated.2*238 The House Report recommending the bill (56 Stat. 1020) clearly shows that its purpose was to permit enrollment of Government employees without military pay, and to give them temporary rank or ratings and necessary military authority and responsibility. 3
*239 *853 Civil service employees enrolled as temporary members of the Coast Guard Reserve were still governed by civil service regulations for annual and sick leave; deductions from pay under the Civil Service Retirement Act were continued; and they received overtime pay for work in excess of 40 hours per week. The fact that petitioner was permitted to enjoy certain privileges accorded to personnel having a military status is of no controlling significance. Unless he was a commissioned officer, we think he was not entitled to the tax exemption benefit provided for in section 22 (b) (13) (A) and (B) of the code, as amended. Commissioned officers of the Coast Guard are appointed by the President. 4 The evidence is clear that petitioner received no such appointment. Congress, having provided for the temporary enrollment of Government employees in the Coast Guard Reserve who were to be given a rank or rating comparable to their civil service classification, was well aware that such provision was in effect when it enacted the above quoted tax exemption section. That it limited the benefits of the $ 1,500 exclusion specifically to a "commissioned officer (or commissioned warrant*240 officer)" clearly indicates to us that Government employees, holding a temporary rank of commissioned officer, were not to receive the benefit of such tax exclusion.
The petitioner argues that if he is not entitled to the $ 1,500 exclusion as a commissioned officer, his entire civil service compensation of approximately $ 5,800 is excludable under subdivision (B) "as a member below the grade of commissioned officer." The absurdity of this contention is at once apparent. This subdivision makes no mention of any specific amount which those persons below the rank of commissioned officer are entitled to exclude. No amount was specified because it is a matter of common knowledge that the compensation of members of the military and naval forces of the United States below the rank of the commissioned officers mentioned in the statute is less than $ 1,500 annually. We think the language of subdivision (B) lends support to our conclusion that Congress advisedly used the terms*241 "commissioned officer (or commissioned warrant officer)" in the sense those terms are used throughout the statutes pertaining to our military and naval forces. We, therefore, conclude that the respondent *854 properly disallowed the claimed exclusion of $ 1,500 in the respective taxable years 1943 and 1944.
Petitioner's claimed deduction in the taxable year 1944 of the amount of $ 2,171.10, which would represent the total amount he would have received for subsistence and rental if he had been compensated under the Pay Readjustment Act, also appears to us to be without merit. Petitioner, in fact, received nothing for subsistence or allowance for quarters. The certificate of enrollment of April 24, 1944, which petitioner received, provides, in part, as follows:
5. You will serve without pay and allowances (other than compensation of their civilian positions in the case of Government employees), except (1) such travel and subsistence allowances as may be specifically authorized and (2) uniform allowances of: None.
A commissioned officer in the Coast Guard Reserve is entitled, in addition to his base pay, to certain allowances for subsistence and quarters. 5 Since petitioner*242 was not a "commissioned" officer and in fact received no allowance for subsistence and quarters, he is not entitled to deduct an amount equivalent to such allowances for tax purposes. The respondent's denial of such contested allowances is sustained.
Under the stipulation, the deduction of the amount of $ 75 claimed as medical expenses was properly disallowed.
Decision will be entered for the respondent.
Footnotes
1. SEC. 141. ADDITIONAL ALLOWANCE FOR MILITARY AND NAVAL PERSONNEL.
(a) In General. -- Section 22 (b) (13) (relating to the exclusion from gross income for military and naval personnel) is amended to read as follows:
"(13) Additional allowance for military and naval personnel. --
"(A) In the case of compensation received during any taxable year and before the termination of the present war as proclaimed by the President, for active service as a commissioned officer (or a commissioned warrant officer) in the military or naval forces of the United States during such war, or, in the case of a citizen or resident of the United States, as a member of the military or naval forces of any of the other United Nations during such war, so much of such compensation as does not exceed $ 1,500.
"(B) Compensation received during any taxable year and before the termination of the present war as proclaimed by the President, for active service as a member below the grade of commissioned officer (or commissioned warrant officer) in the military or naval forces of the United States during such war."↩
2. The Commandant * * * is hereby authorized to enroll as temporary members of the Reserve, for duty under such conditions as he may prescribe * * * such persons (including Government employees without pay other than the compensation of their civilian positions) who by reason of their special training and experience are deemed by the Commandant to be qualified for such duty, * * * to define their powers and duties, and to confer upon them, appropriate to their qualifications and experience, the same ranks, grades and ratings as are provided for the personnel of the regular Coast Guard Reserve.↩
3. H. R. No. 2525, 77th Cong., 2d sess. (1942), in part, states:
"The act of June 6, 1942 (Public Law 599, 77th Cong.), amended section 207 of the Coast Guard Auxiliary and Reserve Act of 1941 so as to authorize the enrollment of especially qualified men as temporary members of the Coast Guard Reserve for full-time, intermittent, or part-time duty without pay. Under this authority men in all walks of life have been enrolled in the Coast Guard Reserve and perform special duty with military authority and responsibility in addition to carrying on their regular vocations. * * *
* * * *
"Under the authority now contained in the Coast Guard Auxiliary and Reserve Act as outlined above, it is believed that Government employees may be enrolled as temporary members of the Coast Guard Reserve without pay on the same basis as persons of other civilian status, but your committee deems it advisable to clarify this authority and resolve any doubt of its applicability to Government employees by specifically providing for temporary membership in the Coast Guard Reserve of Government employees without military pay but with continuance in their civilian positions and the receipt of the compensation thereof. It should be pointed out that the conferring of temporary ranks or ratings upon such persons will not exempt them from liability for training and service under the Selective Training and Service Act of 1940, as amended. It will, however, give to such employees necessary military authority and responsibility during their temporary membership in the Coast Guard Reserve.
* * * *
"This amendment is proposed and recommended by your committee since it would solve this administrative problem by resolving any possible doubt of the authority of the Coast Guard to enroll certain Government employees as temporary members of the Reserve for active Coast Guard duty without the pay of their military rank or rating, and would obviate any possible impairment of the right of such employees to continue to receive the compensation of their civilian positions for the entire period of their performance of active Coast Guard duty as such temporary members. There will be little, if any, change in the nature of their duties after enrollment."↩
4. Sec. 6, Title 14, United States Code Annotated.↩
5. See secs. 5 and 6, Pay Readjustment Act, June 6, 1942 (56 Stat. 359, as amended).↩