Rev. Rul. 58-302

The Internal Revenue Service has reconsidered Revenue Ruling 235, C.B. 1953-2, 23, and nonacquiescences in the decisions in William C. Haynes et ux. v. Commissioner , 23 T.C. 1046, nonacquiescence C.B. 1956-2, 10 and Emil Blarek et ux , v. Commissioner , 23 T.C. 1037, nonacquiescence C.B. 1956-2, 10, involving the issue of the fair rental value of lodging furnished by a taxpayer to a dependent, in the light of the Income Tax Regulations applicable under section 152 of the Internal Revenue Code of 1954 relating to the definition of a dependent.

Revenue Ruling 235, supra , was based upon sections 25 of the Internal Revenue Code of 1939, which corresponds to section 152 of the 1954 Code. The Revenue Ruling holds that in determining who furnished over half of the support of a `dependent' in a situation where several members of a household contribute to the support of the household, consideration should be given to the amount actually used in supporting the various members of the household; that expenses which are equally applicable to the support of each member of the household should be allocated equally among all such members; and that the actual expenses incurred in connection with the house owned by a taxpayer in which lodging is furnished to his parent, and not the fair rental value of such house, should be taken into account in determining whether a taxpayer furnished over half of the parent's support.

In the Haynes and Blarek cases, which were decided under section 25 of the 1939 Code, the Tax Court of the United States held that the fair rental value of lodging furnished a dependent in a house owned by the taxpayer should be included in determining whether more than half of the support of the dependent was contributed by the taxpayer. In conformity with these decisions, the regulations promulgated under section 152 of the Code provide that the fair market value of such an item of support should be taken into consideration in measuring the amount of support furnished a dependent.

In view of the above, it is held that in determining who furnished more than half of the support of a `dependent,' under section 152 of the 1954 Code or section 25 of the 1939 Code, support furnished in the form of lodging is measured in terms of its rental value. To the extent that Revenue Ruling 235 requires such lodging to be measured in terms of actual expenses incurred in connection therewith, it is hereby modified.

Acquiescences have been substituted for nonacquiescences in the Hayes and Blarek cases. See pages 5 and 3.