*1002 During the taxable year petitioners' decedent was the sole support of her adult niece, who was totally blind and unable to earn her own support, and whose father and mother were both dead. As a result of her physical infirmity and in accordance with her own wishes, the niece resided in a small separate apartment on one floor level, where she would be able to get about. Petitioners' decedent paid all expenses. Held, the taxpayer was the head of a family within the meaning of article 25-4,
*449 The Commissioner has determined a deficiency of $930.01 in income tax for the year 1937 against petitioners' decedent. The deficiency is due solely to the disallowance by the Commissioner of a $2,500 personal exemption credit claimed by petition's decedent in her income tax return for the year 1937, and the substitution therefor of a personal exemption credit of $1,000.
The Commissioner explains the adjustment in his deficiency*1003 notice as follows:
A credit for personal exemption has been allowed in amount of $1,000.00 in lieu of $2,500.00 claimed as head of family in your return.
It is held that since you did not maintain a common home for yourself and your dependent niece, exemption as head of family is not allowable. See Article 25-4 of Regulations 94.
Petitioners contest this action of the Commissioner by an appropriate assignment of error.
*450 FINDINGS OF FACT.
All the facts were stipulated, and we adopt the stipulation of facts as our findings of fact. The following statement of the essential facts will suffice for this report.
Petitioners are executors of Grace Adams Howard, the original petitioner herein (hereinafter called the decedent), who died on October 2, 1939.
Prior to her death, decedent was a resident of Washington, D.C., and her Federal income tax return for the year 1937 was filed with the collector of internal revenue at Baltimore, Maryland. Decedent's husband, Beale R. Howard, died in 1935.
Prior to Beale Howard's death, he and decedent had for many years supported Kathryn Gwynn, and decedent continued to support her at all times after his death.
Kathryn*1004 Gwynn was the only surviving child of a sister of Beale Howard. Howard had no brothers or sisters other than the mother of Kathryn Gwynn. This sister died after a long illness in 1904, when Kathryn was twelve years of age. Her father, who was an invalid, died in 1913. His only asset was an insurance policy that produced approximately $50 a month during Kathryn Gwynn's school years, but was completely exhausted many years ago. Prior to the death of Kathryn Gwynn's mother, she expressed to decedent her grave concern for her daughter's future welfare. Decedent assured her that both she and Beale Howard would take Kathryn into their home and treat her as their own child. This promise was kept. Immediately upon the sister's death Kathryn was taken into the Howard home, supported and educated as one of the family along with the Howards' own children, of whom there were three. Kathryn's father died in 1913, leaving no property or income to her other than as above stated.
In 1923 Kathryn was stricken with blindness and has been totally blind ever since. As a result of this change in her physical condition, decedent and her husband decided, in accordance with Kathryn's wishes, *1005 that it would be better for all concerned if she should live in a small apartment on one level, where she would be able to get about. In 1925 an apartment was therefore procured, to which Kathryn moved together with a companion employed some time before as a result of her blindness. This situation continued at all times thereafter, including the year 1937, which Beale Howard, and after his death the decedent, paying all of Kathryn's expenses. Kathryn was wholly dependent upon decedent for support throughout the taxable year, having no trade or occupation and no income, and decedent expended an amount in excess of $6,000 in that year *451 for her support. Decedent in her will, after disposing of personal effects, jewelry, etc., left the residue of her estate in trust and made the first charge upon the trust income a distribution of $600 per month for life to Kathryn Gwynn.
OPINION.
BLACK: In his determination of the dificiency, respondent, in disallowing petitioners' decedent a credit of $2,500 personal exemption as a head of a family, did not do so upon the ground that Kathryn Gwynn was not during the year dependent for support upon her aunt, Grace Adams Howard, petitioners' *1006 decedent. The ground stated by respondent for disallowing the $2,500 personal exemption credit claimed was that since decedent did not maintain a common home for herself and her dependent niece, the exemption claimed as head of a family was not allowable under the provisions of article 25-4 of Regulations 94, printed in the margin. 1
*1007 Petitioners, in support of their contention that decedent was entitled to $2,500 personal exemption as head of a family, rely upon the following points:
1. The decedent was supporting and maintaining and exercising family control over a dependent, which control was based on a moral obligation to support the dependent.
2. The circumstances in decedent's home, coupled with the dependent's infirmity, rendered it necessary that the dependent be maintained in a separate establishment.
3. The dependent was closely connected with the taxpayer by relationship by marriage.
4. The decedent was the "head of a family" within the meaning of section 25(b) of the Revenue Act of 1936.
We think the facts in the record support petitioners on all four points.
1. It is clear that the decedent actually supported her niece and that this niece was wholly dependent on her aunt for support. While there may have been no legal obligation on the part of decedent to *452 support her neice, the facts show that there was a moral obligation on her part to do so. Prior to the death of her husband's sister, decedent promised the sister to take her child into her home and treat her as*1008 one of her children. The keeping of this promise throughout her life, even to the point of making in her will the welfare of her niece the first charge against the residue of her estate, shows the strength of the decedent's moral obligation to support the niece.
The facts in the instant case make it distinguishable from . In the Hoskins case we held that there was neither legal nor moral obligation on the part of the aunt to support the niece, who was an adult about thirty years of age, in good health, and employed for a part of the time as a stenographer in each of the taxable years. In that case, in ruling that the niece was not dependent for support upon her aunt, within the meaning of the applicable regulations, we said:
* * * 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. Cf. *1009 . * * *
In the instant case it is clear that Kathryn was wholly dependent upon decedent for support throughout the taxable year, within the meaning of the Commissioner's regulations, for she was totally blind, had not trade or occupation, and no income from any source except what her aunt gave her.
2. The circumstances in decedent's home, coupled with the dependent's infirmity, rendered it necessary and advisable that the niece be maintained in a separate establishment, the decedent being financially able to defray the expenses thereof.
Both the Board and the courts have recognized situations of such a character as to render it necessary for persons to maintain relatives elsewhere than in a common home. In , the Board said, of a situation in which a daughter supported an insane mother in a state institution:
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. The record here fully establishes the necessity for the mother's absence*1010 from her daughter's home. * * *
See also ; Mackechney v.United States, (U.S. Dist Ct., N. Dist. Tex., April 5, 1926); .
3. The dependent in this case, Kathryn Gwynn, was the only surviving niece of the decedent's husband, and was therefore a niece *453 by marriage to decedent. The Board has recognized that a dependent niece is closely connected with taxpayer by blood.
In , the Board said:
This petitioner actually supported and maintained in one household two individuals who were closely connected with him, his mother and niece, and exercised a certain amount of family control over them. * * *
There is no question but that a niece is closely connected by blood relationship to her aunt or uncle. It follows then that a niece by marriage is just as closely connected by marriage as a niece by blood would be connected by blood. For reasons already stated, there was such relationship by marriage between Kathryn Gwynn and petitioners' decedent as to bring the case within the Commissioner's applicable regulation.
4. From*1011 what we have said above, it seems clear that petitioners' decedent was during the taxable year the head of a family within the meaning of section 25(b) of the Revenue Act of 1936 and the Commissioner's regulation promulgated thereunder. Therefore we reverse the action of the Commissioner in disallowing the personal exemption credit of $2,500.
Decision will be entered for the petitioners.
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 dependnt 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 still 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. * * *