Rev. Rul. 64-222

Advice has been requested whether Revenue Rulings 235, C.B. 1953-2, 23, and 58-419, C.B. 1958-2, 57, relating to the determination of who provided more than one-half of the support for members of a household, are applicable to cases in which the facts are substantially the same as those involved in the cases of Wilfred Abel, et ux v. Commissioner, T.C. Memo 1962-192, and Carl G. Jordan, et ux v. Commissioner, T.C. Memo 1958-152.

In the Abel case, a son's contributions for the joint support of his father and stepmother totaled $850 for the taxable year. The father received a total of $750 in old-age benefits from the Social Security Administration, in which the stepmother had no interest. The father and the stepmother comprised a household of which the son was not a member. The Tax Court of the United States held that the contribution of over half of the total amount available for the support of the father and the stepmother was sufficient to make both of them the son's dependents.

The court indicated that, for purposes of the dependency exemption, the parents could be treated as a unit.

The facts in the Jordan case were substantially similar to those in the Abel case except that the amounts received and used by the father for his and his wife's support consisted of Spanish-American War Veteran's pension checks rather than old-age benefit payments. In holding that a son who had supplied more than one-half the total support for both parents was entitled to dependency exemptions for both, the court said that the record, as a whole, indicated that the parents' total resources were a pool out of which their expenses were paid.

Revenue Ruling 235 holds, in part, that, in determining who furnished over one-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. However, in the absence of an actual record of the expenses relating to the support of each member of the household, a pro rata portion of the aggregate of such expenses may be allocated to each member. Thus, unless a taxpayer is able to show otherwise, the amount he contributes toward the support of members of the household will be presumed to be used equally for the support and maintenance of each of such members. The ruling holds further that once the cost of supporting each member of the household is determined, the amount which a member of the household used for his own support should be subtracted in determining the amount which he contributed toward the support of other members of the household. That ruling contains several examples which illustrate the holdings expressed therein. The examples, as well as the holdings, however, relate only to the determination of who, among members of the same household, supplied support for other members of the household.

In Revenue Ruling 58-419, a wife's insurance benefit, to which she was entitled under section 202(b) of the Social Security Act, as amended, 42 U.S. 402(b), and the old-age insurance benefit of her husband were received monthly through one check made payable to them jointly for the total amount of their respective monthly benefits. The payments were used by the husband and wife for their support. Since a married son also contributed toward their support, he inquired concerning the amount of each monthly check which should be attributed to each parent for the purpose of determining whether he furnished over half of the support of each parent for the year involved. The ruling holds, in part, that the separate amount of the payments attributable to each parent under section 202(b)(2) of the Social Security Act must be taken into consideration in determining the amount of support furnished to each of them for purposes of section 152 of the Internal Revenue Code of 1954.

In determining whether one person is the dependent of another within the meaning of section 152 of the Code, the test is that of `actual support.' That is, where all the other conditions are met, the taxpayer is entitled to a dependency exemption for another person if he actually provides more than half the support of such person for the taxable year. See I.T. 3723, C.B. 1945, 122; I.T. 3834, C.B. 1947-1, 29; and Revenue Ruling 59-355, C.B. 1959-2, 53. See also Revenue Ruling 57-344, C.B. 1957-2, 112, which holds, in part, that any part of the survivors insurance benefit payments received under the Social Security Act for the child of a deceased individual, and used for the support of such child, must be considered as the child's contribution toward his or her support in determining who furnished more than one-half of the child's support.

After careful consideration, the Internal Revenue Service has concluded that where the facts are similar to those involved in Abel and Jordan , the rationale of those decisions is applicable regardless of whether the result will be favorable or unfavorable to the taxpayer. For example, if the total amount of support supplied by the son in the Abel case has been less than the total amount supplied by the father, the son would not have been entitled to a dependency exemption for either the father or the mother.

The pro rata allocation set forth in Revenue Ruling 235, therefore, is applicable only in situations where there is no record of the amounts actually used in supporting the various members of a household. Moreover, the holding in Revenue Ruling 235, as well as the examples set forth therein, are clearly applicable only to the allocation of support among taxpayers who are members of the same household. Thus, the facts in that ruling are distinguishable from those involved in the Abel and Jordan cases, where the individual seeking the dependency exemption was not a member of the same household and did not share in the common fund. In cases where contributions to the support of the common household are made by an outsider in addition to those made by the members, the allocation under Revenue Ruling 235 will first be made as among members of the household, and then the outsider's contribution will be allocated equally among the members of the household for the purpose of determining the dependency exemptions the outsider may claim.

In view of the foregoing, it is held that, where several members of a household contribute toward expenses which are equally applicable to the support of each member of the household, the contributing members will be presumed, in the absence of evidence of actual support, to have pooled their contributions to the support of the household, and each member thereof shall be considered to have received an equal part of the pooled contributions as a part of his support. Members receiving more than they contribute will be considered to have received support from members receiving less than they contribute, to the extent the amount considered to have been received exceeds the amount contributed.

Moreover, where members of a household contribute to their own support, and also receive support from an individual outside the household not sharing in the common fund, in the absence of evidence of actual support, the individual outside the household will be considered to be contributing equal amounts to each member of the household.

Revenue Ruling 58-419, C.B. 1958-2, 57, is hereby modified to remove therefrom any suggestion that an individual's social security payments must in all cases be considered to have been applied solely to his support before any portion of such payments may be considered to have been applied toward the support of another.