Rev. Rul. 57-344

Advice has been requested whether survivors insurance benefit payments made under section 202 of Title II of the Social Security Act, 49 Stat. 620, 42 U.S.C. 402, as amended, to the child of an individual, who died fully or currently insured under such Act, must be considered as furnished by the child in determining whether the child or the surviving parent, or other person having custody of the child, furnished more than one half of the child's support for the purposes of section 151(e) of the Internal Revenue Code of 1954.

In general, section 151(e) of the Code allows to a taxpayer an exemption of $600 for each dependent, as defined in section 152 of the Code, whose gross income for the calendar year in which the taxable year of the taxpayer begins is less than $600, or who is a child of the taxpayer who (1) has not attained the age of 19 at the close of the calendar year in which the taxable year of the taxpayer begins, or (2) is a student.

Section 202 of the Social Security Act, as amended, supra , provides, in part, as follows:

(d) (1) Every child (as defined in section 216(e)) of an individual entitled to old-age insurance benefits, or of an individual who died a fully or currently insured individual after 1939, if such child-

(A) has filed application for child's insurance benefits,

* shall be entitled to a child's insurance benefit for each month, beginning with the first month after August 1950 in which such child becomes so entitled to such insurance benefits and ending with the month preceding the first month in which any of the following occurs: such child dies, marries, is adopted (except for adoption by a step-parent, grandparent, aunt, or uncle subsequent to the death of such fully or currently insured individual), or attains the age of eighteen.

In view of the foregoing, it is held that the aforementioned child's insurance benefits belong to the child, even if they are paid to the child's parent, surviving parent, or other individual having custody of the child. Such benefits do not constitute gross income and are not subject to Federal income tax. See I.T. 3447, C.B. 1941-1, 191. However, any part of such benefits received and used for the support of the child must be considered as the child's contribution toward his of her support in determining who furnished more than one-half of the child's support for the purpose of section 151(e) of the Code.