Petition for Writ of Certiorari — Schneier v. Commissioner

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84-819 ©

NO.

IN THE SUPREME COURT OF THE WY 1 1624

UNITED STATES

OCTOBER TERM 1984.9 ~~

MAX SCHNEIER,

Petitioner,

Vv.

COMMISSIONER OF INTERNAL REVENUE,

Respondent

PETITION FOR A WRIT OF CERTIORARI TO

THE UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

MAX SCHNEIER, Pro Se

4150 VIA DOLCE # 224

MARINA DEL REY, CA. 90291

(213) 823-7473

ALEXAMOLF t. |

| Office -Suprame Court, U

| FILED

QUESTIONS PRESENTED

1. Whether respondent Commissioner can

constitutionally promulgate a Revenue

Ruling which repeals a long-standing spe-

cific,unequivocal,vested,statutory and

regulatory right and privilege,thus di-

vesting petitioner~(and countless other

taxpayers similarly situated)-of the abil-

ity to take his (and their) stepchildren

as dependency exemptions and,as a result,

depriving him (and them) of property

gained by exercising that vested right

and privilege upon which he (and they)

justifiably relied?

a. Whether a United States District Court

of Appeals can constitutionally uphold and

sanction such repeal and deprivation?

b. Whether a United States Court of

Appeals can constitutionally decide a

federal question in a way in conflict

with applicable decisions of the Supreme

Court of the United States?

ate

LIST OF PARTIES

All of the parties in the United States

Court of Appeals for the Ninth Circuit

are listed in the caption.

-ii-

TABLE OF CONTENTS

PAGE

Questions Presented .............. i

CROE OE Pee a ceaks eens eeheuuye ie

TUBES OE COMGRIES occ kccees te dws es iii

TORIO GE GUEROCISIOS 2.0.05 cece ins iv-ix

st a ee aa ee ere 1

Statement of Jurisdiction ........ 1-2

Statement of the Case .........20. 3-12

Reasons for Granting Petition .... 13-14

PO ee rr ee eee ee 14-63

Sere eee CTP eRT TE Te Cee 64-65

Appendix A:

Giiebede., Decisions, Orders &

Stipulation of Facts Below.... la-35a

Appendix B:

Federal Statutes, Treasury

Regulations, Revenue Ruling,

and Legislative History

RPO 2s ha i 5s wee awk HVE CRO lb-15b

-iii-

TABLE OF AUTHORITIES

CASES: PAGE:

Burnet v. Harmel,

SF Wah c PEED bo svt ncnenncres 37

C.I.R.v.Greenspun,

670 F.zd 123(0th oo CS . ) 3} 52

Claridge Apartments Co. v

Comm'r, 323 U.S. Gi (194Gay. 59,60

Crane v. Commissioner

i dee ee «6s 640.08 h 26

Crooks v. Harrelson

8 a 95. | Renner 16

D.B.Anders, 48 T.C.815(1967)..... 43

Dobson v. Commissioner,

SEO UO. B. WUPERUED we osccccccceses 13

Gould v. Gould

245 U.S. 151, i & ¢ eee 27

Grace E.Lang 6, T+€.404(1975) a

Greene V.McE]

roy, 360 U-S.474 (195mg

Greene Vv. United State

376 U.S. 149 Tog} tas

~~? \

“ ay i

len M.Lutter VC .I.R 61 T.C.685 -

~ BEST AVAILABLE COPY

Sims v.United States,

‘357 F.2d 434 (Gth Cir.1958)........... 44

Social Sec

Taft v.Helvering,31l U.S.195(1940)... 34

URI @ 5) aa 13-14-17-

U.S. Det i siree6 pee bhlen 42-43

United aoe Vv. ppicego.B. & OR

Co,, 412 U 60 Ser 13

United States v.Estate of Donnelly

ee Wat RE 35d Oh cé vetcdeccces 59

United States v.Merriam

Bt Re ie 27

U.Se SFOCTILS) cccccccccccccccces 59-60

ic Radio & T.V.

U.S.v.Ol

-vi-

——————

- CONSTITUTIONAL PROVISION INVOLVED

1. Article I, Section 8 [1] of the

| United States Constitution provides in

relevant part:

The Congress shall have Power To

lay and collect Taxes, Duties,

Imposts, and Excises * * *

2. Article I, Section 8 [i8} of the

United States Constitution provides that

Congress shall have Power:

To make all Laws which shall be

necessary and proper for carrying

into Execution the foregoing Powers,

and all other Powers vested by this

Constitution in the Government of

the United States,or in any Depart-

ment or Officer thereof.

3. The Fifth Amendment to the United

States Constitution provides in relevant

part:

No person shall * * * be deprived of

life,liberty,or property,without due

process of law * * *

. -vii-

— > &

t q

SY Si ie Soak ee: ee a -:

Senate lio CY, i areca a Alb

SORES IBS" Rs a Renae |

aa, Fate 2065 sia re. ears

“ eT ge ree, Ne as

eer in LP ORL hy beet es SS

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CLE ANN eminem bites» wt ae.

FEDERAL STATUTES INVOLVED

28 USCA S 2101(c)

28 USCA S 1291

28 USCA S 7442

26 USCA S 151(a) (e) (1) (3) App.

26 USCA S 152(a) (2) (9) ;(e) App.

26 USCA S 6013(a), (d) (3), (e)(2) App.

Tax Reform Act of 1984- App.

Public Law 98-369,Section

423 (Eff.January 1,1985).

TREASURY REGULATIONS INVOLVED

26CFR $1.151-1(a) ;2(a) (b¥;3(a) App.

26CFR S1.152-1(a) (1) ;2(i) ; (b)

26CFR $1.152-2(d) App.

26CFR S1.152-4(a) (d) App.

26CFR S1.6013-1(a) ;4(a) (b) ;

5 (c) App.

REVENUE RULING INVOLVED

78-91, (1978, 1 CB 36) App.

LEGISLATIVE HISTORY INVOLVED

Senate Rept.No.488-90th Congress

lst Session (1967 App.

House Report No.102-90th Con-

gress lst Session(1967) App.

DOCUMENTS FROM RECORD ON APPEAL

8b-10b

10b

10b-11b

11b-12b

13b

14b-15b

15b

1. Opinion,United States Court App.A

of Appeals For the 9th Cire. pp,la-10a

No. 83-7533, filed June 15,

1984.

2. Order, 9th Cir., filed App.A

July 31, 1984 denying re- pp,lla-1l2a

hearing and suggestion for

rehearing en banc.

-viii-

sca!

DOCUMENTS cont.

3. Order, 9th Cir., filed

August 14, 1984 Order

Staying mandate.

4. Memorandum Findings of

Fact and Opinion;

United States Tax Court

No. 8277-82

5. Stipulations of Facts

Docket No. 8277-82

dated April 4, 1983. =

-ix-

App.

IN THE SUPREME COURT OF THE UNITED STATES

AA econ a ———

OCTOBER TERM, 1984

NO.

MAX SCHNEIER,

Petitioner,

Vv.

COMMISSIONER OF INTERNAL REVENUE,

Respondent

PETITION FOR A WRIT OF CERTIORARI TO

THE UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT.

Max Schneier, pro se, petitions for a

writ of certiorari to review the judgment

of the United States Court of Appeals for

the Ninth Circuit in this case.

OPINIONS BELOW

The opinion of the court of appeals

(App.A,infra,la-((a) has not been official-

ly reported. The opinion of the Tax Court

(App.A, infraj/4¥a-2Ja) has not been offi-

cially reported.

JURISDICTION

The final judgment of the court of ap-

peals was stayed on August 14,1984, pending

whe

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anf

aif a tye

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ee ee “a — 2

this timely application for a writ of

certiorari (App.A,infra,|3(a). A timely

petition for rehearing and suggestion for

a rehearing en banc, was denied on July

31,1984 (App.A,infrallai2a) The final judg-

ment of the tax court was entered July 6,

1983 (App.A,infra,3Q(a). The jurisdic-

tion of this Court is invoked under 28

U.S.C. 2101(c).

///

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STATEMENT OF THE CASE

1. Petitioner timely filed a joint tax

return for calendar year 1978 with his

then wife to whom he was legaily married.

(See Stipulation of facts (2)(5) App.A,

infra,c,32a-33a.) On that joint return,

he claimed as dependency exemptions his

two then stepsons. (See Stipulation of

Fact (6)(7),(App.A,infra,p,33a.) Peti-

tioner claimed his dependency TP

in accordance “SS existing statutes

“-

and regulations.

I. 26 USCA 151(a)(e)(1)(3); 152(a)(2) or

(9); 6013(a)(d) (3). (App.B,infra, pp,

lb-4b for relevant parts)

These statutes grant,inter alia, a step-

father the specific and unequivocal right

to take his stepchildren as dependent

exemptions on his joint tax returm if he

provides more than half of their support

and they are members of his household for

more than half a year.

2. 26 CFR 1.151-1(a);2(a) (b) ;3(a); 1.152-1

(a) (1) ;2(1); (6b); (c); 1.152-2(a) (1); (d) 5

1,152-4(a) ;(d) (1) (2); ; 1.6013-1

(a) ;4(a) (b) ;5(c). (App.B,infra,pp,

7b-12b, for relevant parts)

These Treasury regulations inter alia

support the aforesaid statutes without

qualification.

nie

During 1978,petitioner's two stepsons

were minors (See Stip.(6),App.A,infra,p,

33a),and were members of his household

for almost that entire year.(See Stip.

(7),App.A, infra, p, 33a.)

During 1978,petitioner provided more

than half of his stepsons' support. (See

Stip. (8) ,App.A,infra,p,33a.) (The record

shows 77% of theirtotal support. It also

shows that petitioner was the only person

in the household who had any income or

assets during 1978.)

Petitioner was neither a party to the

divorce agreement or separation agreement

between Judy(Stackel)Schneier-his wife in

1978-uor personally knew of his wife or

her ex-husband prior to 1976; nor was

aware of the terms of their divorce or sep-

aration agreement prior to the deficiency

notice he received from the respondent in

May,1981. (See Stip.(12)App.A,infra,p,aa)

2. On May 14, 1981, petitioner received

alt a

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a deficiency notice from respondent in the

amount of $523 resulting from respondent's

disallowance of the dependency exemptions

for his two stepsons. Petitioner notified

respondent that he had relied on his stat-

utory and regulatory right and privilege

to claim his stepsons as dependency exemp-

tions,since he complied with all of the

requirements of the aforesaid statutes and

regulations. The respondent was adamant

in his stand,basing his position on the

fact that the father of the children had

taken the children as his dependent exemp-

tions in accordance with the law.

3. Petitioner filed a timely petition for

a hearing in the United States Tax Court

under 26 USCA 7442 which was granted. On

April 4,1983, the hearing date,petitioner

moved for a motion for summary judgment in

accordance with FRCP Rule 56,together with

supporting affidavits and documents show-

ing there was no genuine issue as to any

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material fact and,therefore,the petitioner

was entitled to a judgment as a matter of

law. The court instructed respondent to

respond to the motion and scheduled the

parties to appear in court on April 7,1983.

On that date,the court suggested that the

petitioner withdraw his motion for summa-

ry judgment since there were "no factual

issues in the case; that (it was) strictly

a question of law"; and that "there really

(wasn't) any advantage to disposing of the

motion for summary judgment."' (quoted from

transcript of court proceedings on April

7,1983.) After a conference in chambers,

petitioner reluctantly agreed to withdraw

his motion for summary judgment provided

that all documents supporting the motion

were made part of the record. The Court

agreed to admit those documents as peti-

tioner's memorandum and brief in support

of petitioner's position. (quoting from

transcript of proceedings on April 7,1983.)

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4. Respondent and petitioner,before com-

mencement of the proceedings,had entered

into stipulation of the facts, (See App.A,

infra,pp,3)a-35a),which were made part of

the record.

5. The Tax Court found for respondent

holding that "a spouse who files a joint

tax return with a custodial spouse is bound

by the provisions of (remedial) subsection

26 CFR 152(e)",~ and that its holding

"did not result in an arbitrary and capri-

cious classification.” (See App.A,infra,

p.17a). Both the respondent and the Tax

Court referred to the instant case as,

case of first impression.’’(quote from

trial transcript.)

3. (See Appendix A,infra,p.p,/4a-29a)

4. (See Appendix B,infra,p.p,3b-4b for

relevant sections)

Subsection 152(e) provides, inter-alia,

for divorced parents to agree between

themselves who will claim the children

as dependency exemptions.

The Tax Court rendered its final

decision on July 6,1983 ordering petition-

er to satisfy the $523.00 tax delttcteding

6. On April 12,1983,petitioner filed a

timely notice of appeal from the Tax Court

decision,which notice was entered by that

court on April 15,1983. The United States

Court of Appeals noted jurisdiction under

28 USCA 1291 and petitioner's opening

brief was timely filed on September 23,

1983. In addition,petitioner filed a time-

ly reply brief on December 12,1983,to re-

spondent's delayed brief. Oral argument

was scheduled and heard on June 6,1984.

The Ninth Circuit Court of Appeals handed

down its decision on June 15,1984 s/ re-

viewing the tax court's legal conclusions

de novo. (App.A,infra,p,2a.) It concluded

that the tax court correctly upheld the

Commissioner's disallowance of petition-

er's dependent exemptions and deficiency

5. See Appendix A, p, IVa.

6. See Appendix A, pp,/!.a-(da.

-8-

‘

assessment. (App.A, infra,p,{a—(0a.

The main support for the Ninth Cir-

cuit's conclusion was Revenue Ruling 78-91

crem-acass), °™ ten which respondent

makes it forever impossible for a step-

father to claim his stepchildren as de-

pendency caiuaasidha ahs though he meets

all of the statutory and regulatory re-

quirements to do so,-if that stepfather

happens to marry a divorced woman with

children,which divorced woman previously

agreed,in writing,to permit her former

husband to claim the children as his de-

pendency exemptions;even if the stepfa-

ther is neither aware of that agreement

until he receives his deficiency notice

from respondent,nor knew the parties at

7. See Appendix A,infra,pp,S(a)-7(a).

8. See Appendix B,infra, p,13b

Revenue Ruling 78-91,inter alia,

mandates that all support provided by

a stepfather shall be treated as

coming from his wife,the mother of

his stepchildren.

a Ses en HEA NS hoa Sah OTe stl ni

the time they signed their agreement.

(See App.A, infra, p, 34a.)

Respondent,in effect,establishes a

classification of stepfathers and then,

in effect,repeals their statutory and

regulatory right and privilege to take

their stepchildren as dependent exemptions,

even though they completely comply with

the requirements Congress mandated.

In so deciding, the Ninth Circuit

completely disregarded,and did not even

refer to the legislative history of the

remedial legislation in the Senate 10

and House Reports which expressly and

unequivocally excludes from applicability

of remedial subsection 26 USCA 152(e)

all ‘third persons who provide more than

half of a child's support during the

10. Senate Report No. 488, (Finance Com-

mittee) ,Aug.3,1967{To accompany H.R.

6056] (Pub. L.90-78) ,90th Cong.) lst

Sess.(1967) (See App.B,infra,pp,l4b-

15b for relevant parts).

11. House Report No.102,90th Cong.lst Sess.

(1967)1967-2C.B.590-594(See App.B,infra,

p,t§ b for relevant parts.)

«t6-

12/

taxable year. The Ninth Circuit also

completely disregarded,and did not mention,

Treasury Regulation 1.152-4(a) which

excludes third persons who provide more

than half of a dependent's support from

being affected by remedial subsection

152(e). (See App. B, infra, p,10b.)

Additionally, in so~deciding, the

Ninth Circuit evaded the gravamen require-

ment of remedial subsection 152(e) and

Treasury Regulation 1.152-4(a),i.e.,that

both the custodial and noncustodial par-

ent must show that either,or both of them

combined,have provided more than half of

their children's support during the tax-

able year before the noncustodial spouse

will be entitled to the benefits of reme-

13/

dial section 152(e) (2) (a).

IZ. See Senate Report No.488,Part ITT,

par.l (App.B,infra,pp.14b-15b)

See House Report No.102,Part ITT,

par.l (App.B,infra, p,15b.)

13. See App. B, infra, p,3b.

atte

a we

ole BR tt Me. iS oe el cae ee,

7. Petitioner timely filed a petition

for rehearing and suggestion for rehearing

en banc on June 25, 1984, which was denied

by the Ninth Circuit on July 31, 1984.

Petitioner then filed a timely motion for

a stay of mandate pending timely applica-

tion for writ of certiorari. The Ninth

Circuit issued an order staying mandate

on August 14,1984 for a period of 90 days

from the date of the order,pending timely

application for writ of certiorari within

that time B

///

IG. See App. A, infra, p,lla-/24.

15. See App. A, infra, pJ3a.

22.

ae Oh ae

REASONS FOR GRANTING PETITION

Although this Court has shown a re-

luctance to grant certiorari in federal

tax cases in the absence of a clear con-

flict of decisions between the court of

appeals for two circuits,it has,neverthe-

less made exceptions where the cause meets

any of the following tests:

a.-where a showing is made that substan-

tial numbers of taxpayers are affected”

b.-where there is a "clear-cut mistake of

law" in the decision of the court

iin

c.-where there are "questions of law,deci-

sion of which is unembarrassed by any

disputed question of fact or any neces-

sity to draw an inference of fact from

basic findings."

17 See ,e.g.United States v. Chicago,B &

oR. Co. 412 U.S.

os obson v. Commissioner, 320 U.S.489,

3/ Trust of Bingham v.Comm'r, 325,U.S.

365,371 (1944)

atte

d.-The Court has "frequently reexamined,

as matters of law,determinations by

(the courts below) of the meaning of

the words of a statute as applied to

facts found by (those courts.)"

e.-The Court has granted certiorari when

the decisions of the courts below de-

parts from or conflicts with the prin-

ciples laid down in prior decisions of

the Court. 2/

ARGUMENT

Petitioner's cause meets all five of

these tests:

a.-Countless numbers of stepfathers,simi-

larly situated to the petitioner,are

in danger of having their dependency

exemptions disallowed for prior years,

if the decision of the court of appeals

is allowed to stand.

47 Trust of Bingham v. Comm'r, 325 U.S.

365, 371 (1944)

5/ See e.g., Trust of Bingham v.Comm'r,

325 U.S. 365,371(1944)

othe

b.-In the instant case,the court of appeals

has made a clear-cut mistake of law by

denying petitioner a specific,unequivocal,

vested statutory and regulatory right

and privilege constitutionally granted

by the Congress,which right and priv-

ilege have not been directly or indi-

rectly repealed by the Congress as of

December 31,1983,and have existed for

Ned pe Ep EN ASA e taba AED dC a SL asi

more than half a century. Neither has

Congress ever directly (or indirectly)

made that right and privilege con-

tingent upon any other person or sec-

tion of the Internal Revenue Code.

c.-The court of appeals has stipulated

that "there are no disputed issues of

fact. The cause involves pure ques-

tions of law not related to any factual

issues. All factual issues having any

bearing on the questions of law have

67 Opinion by Court of Appeals for the

Ninth Circuit (See Appendix A,infra,p, 43)

-15-

;

}

{

; 7/

been stipulated to by respondent. —

d.-The court of appeals has misinterpret-

ed or disregarded words, or not given

words their ordinary meaning in the

legislative history, the ee

and regulations ee and has at-

tempted to "wrench meanings from the

words which literally..they do not beam

e.-The Court of Appeals for the Ninth Cir-

cuit has decided the federal questions

of law involved in this cause in a way

in conflict with 52 applicable decisions

of the Supreme Court of the United

77 See Stipulations of Facts (App. A,

Infra, pp,3la-35a. )

8/ Senate Report No.488,Part III, 90th

Congress 1967 (See App. B infra,pp,14b-15b.

House Report No. 102, Part III, 90th

Congress 1967 (See App. B, supra, p,l5b.)

9/ 26USCA 151(a) (e) (1) (3), (See App.B,

infra,p,lb) 26USCA 152(a) (2)or (9). (See

App.B,infra, p,2b).

10/ 26CFR 1.151- -l1(a)(b),3(a) (See App.B,

infra,p,8b); 26CRF 1. 152- -l1(a) (2) (i) (b)C€ )

(See App. B,infra, pp,9b-10b

11/ Crooks v. Harrelson, 282 U.S. 55,60

(1930).

inthe

States contained in (1) Petitioner's

Brief in Support of Petitioner's Posi-

tion which the United States Tax Court

made part of the record and forwarded

Same to the Court of Appeals for the

Ninth Circuit; (2) Petitioner's Open-

ing Brief; (3) Petitioner's Reply

Brief; and (4) Petitioner's Petition

;

7 for Rehearing and Suggestion for Re-

;

hearing en Banc. This Court has grant-

ed certiorari when a lower federal

court disregards the principles laid

. down in prior Supreme Court dectatoos™

Respondent Commissioner,by virtue of

his stipulations,concedes that petitioner

De at Vee ia Di st CN yh

meets all of the requirement of the afore-

mentioned statutory and regulatory scheme

to claim his stepchildren as dependency

exemptions but that remedial section

Cin D id aaNet AN init Dai ta Nii Raise rant

12/ Trust of Bingham v. gone Ei

+ - > -

oF =

13/

152 (e)(2)(A) + authorizes their father

to claim them as his dependents for 1978.

Respondent's self-serving response

to petitioner's position that the legis-

— history of the remedial ue Tm

~~ and Treasury Regulation 1.152-4(a)

excluded any "third person” from the appli-

cability of the remedial--legislation was

that petitioner was not a "true third par-

ey.” 18/ Respondent ,however,offered no

evidence whatsoever to support that state-

ment and the entire record is likewise

barren.

137 See App.B, infra, pp,3b.

Subsection 152(e)(2)(A) authorizes the non-

custodial spouse to claim his children as

dependent deductions if he has a written

agreement with his ex-wife to that effect

and if he contributes at least $600 to-

wards the support of each child during the

calendar year.This subsection,however,is

not triggered unless he or his wife,or

both provide more than half of the chil-

dren's support for the taxable year. (Sub-

section 152(e)(1)(A).

14/ See App B. infra, Part ITI, 14b-15b

and Part Ill, 15b.

15/ See App. B, infra, 10b.

I6/ Trial Transcript, page 31.

-18-

The United States Tax Court's re-

sponse to the ‘third party' exclusion was

that "while Congress did indicate that

section 152(e) was not to apply where a

"third party’ contributes over one-half

of the child's support,...there is no in-

dication that Congress intended a "third

party” to include a stepparent under the

= 17/

instant factual situation." ,

The Tax Court paid mere lip aie OD

to Treasury Regulation 26 CFR 1.152-4(a)

which is on point and restates the legis-

lative history's exclusion of ‘third per-

sons’ from the applicability of remedial

section 152(e).

177 App. A, infra, p.26(a)-27(a).

I8/ See App. A, infra, 19a-20a

T5/ See App. B, infra, p.10b

26CFR 1.152-4a states in relevant

part:

Thus, section 152(e) and this section do

not apply if a person other than the par-

ents provides one-half or more for the sup-

port of such child during the calendar

year. (emphasis added.

The words “such child" refers to "Children

of Divorced Parents,"which is part of the

title of the legislative history of the

Act. (See App.B,infra,p.15b.)

Petitioner believes that Congress'

inclusion of the requirement in remedial

subsection 152(e)(1) (A) 20) nat either the

non-custodial or the custodial spouse,or

both, show that they provided more than

half of the childrens’ support before the

non-custodial spouse can reach the benefits

of subsection 1$2(0)(2) (a) proves that

Congress intended to continue the uniform-

ity of the common requirement for all de-

pendency deductions, i.e., that any person

who claims a dependency exemption must

provide more than half of the dependent's

support during the taxable year. Addition-

ally, the fact that Congress did not dis-

turb the then existing statutory scheme

giving stepfathers the right and privilege

to take their stepchildren as dependent

deductions if they meet all of the requi-

rements, (which the respondent stipulated

207 App. B, infra, p. 3b.

21/ See note 13, supra.

-20.

the petitioner did),is overpowering evi-

dence of Congress' interition to include

stepfathers as ‘third persons' to be ex-

cluded from the applicability of remedial

section 152(e).

Petitioner brings to the Court's at-

tention that the Court of Appeals for the

Ninth Circuit neither mentioned the ‘third

person’ exclusion in the legislative his-

tory and in the Treasury Regulation, nor

addressed the possible significance of

that exclusion to the instant case. This

glaring omission was pointed out to the

Ninth Circuit by the petitioner in his

Petition for Rehearing and Suggestion for

Rehearing en Banc.

Petitioner pointed out all during the

proceedings, and in his briefs and peti-

tion for rehearing, that the Tax Court had

overruled the respondent Commissioner in a

case involving a grandfather who had also

been disallowed dependency exemptions for

-21-

22/

his two grandchildren. The respondent

based his disallowance on the same ground

as in the instant case, e.g., that there

was a written agreement between the di-

vorced parents (the ex-wife was the grand-

father's daughter),permitting the non-

custodial spouse to take the children as

his dependency deductions.

Notwithstanding that agreement, the

Tax Court ruled that the grandfather was a

"third person' excluded from the applica-

bility of remedial section 152(e) enacted

in 1967,since he had provided more than

half of the grandchildren's support and

that they had lived under his roof with

their mother for more than half the cal-

endar year.

A similar result denying the divorced

23/ 24

mother or the divorced father depend-

ency deductions was reached by the Tax

22/Nathaniel R.Winslow Jr.v.Commissioner

30 TCM 769 (1971-184)

23/Helen M.Lutter v.C.1I.R.61TC685 (1974)

24/Joseph R.Fisher v.C.1.R.Sec.78,492-PH,TC.

-22-

*“@E¥Fe)

Court in cases involving the provision of

more than half of the children's support

by a state welfare agency. These two cases

were also similarly placed on the record

by the petitioner. All three cases were

disregarded and not even mentioned by the

Tax Court or the Ninth Circuit in their

opinions.

These three cases,graphically demon-

Strate that the Tax Court recognizes that

"third persons' can be excluded from being

affected by remedial section 152(e),if

they provide more than half of the di-

vorced children's support,irrespective of

the claims of the father or the mother or

any written agreement between them.

It begs common sense to suppose that

Congress had grandparents and welfare

agencies in mind when it excluded ‘third

persons' from the applicability of the

remedial statute instead of the most ob-

vious,numerous group of 'third persons’,

atte

i.e., stepfathers.

In an effort to explain to the Tax

Court and the Court of Appeals for the

Ninth Circuit the reason why Congress gave

this narrow relief to the respondent in

1967,petitioner placed on the record 1982

statistics by the United States Bureau of

Census which showed that 4,214,000 homes

were headed by single parent,divorced wom-

en,up from 1,727,000 in 1970,an astound-

ing increase of 2,487,000 homes headed by

divorced women.

The respondent was aware of this grow-

ing pheonomenon in 1966 when he asked Con-

gress for relief in curbing the number of

anticipated tax cases between divorced par-

ents.Congress granted the limited relief

requested,e.g.,relief from cases between

divorced parents,but not for cases between

a divorced woman with children,who re-

marries and the new spouse stepfather can

prove that he provides more than half of

his stepchildren's support,-as would any

other person who claims a dependency ex-

emption.

Congress,therefore,made it crystal

clear in the legislative history,and by

retaining the dependency exemption for

stepchildren that the relief it was grant-

ing only applied as between divorced par-

ents and not to any other person who pro-

vided more than half of a child's support.

The Secretary of the Treasury, likewise,

adopted regulations to that effect

This Court addressed this very issue

of Congress’ intent concerning a tax —

ute in New Colonial Ice Co. v. Helvering —

when it stated:

Had there been a purpose, (by the

Congress) to depart from the general

policy...and to make the right to

deduction transferable or available

to others than the taxpayer...it is

but reasonable to believe that pur-

Se would have been clearly express-

= (Emphasis added.)

26/ 292 U.S. 435, 441 (1933)

ite

257 CFR 26 Section 1.152-4(a)(see note 9,supra

Congress’ silence in the legislative

history,in not specifically excluding step-

fathers from the class of ‘third persons'

who were not to be affected by the remedial

legisiation,is a deafening reaffirmation of

stepfathers' dependency exemption rights

and privileges. Both respondent and the

Tax Court were required to give the words-

in Congress’ stated exclusion of ‘third

persons’ from applicability of remedial

subsection 152(e) + their ordinary mean-

ing. As ee stated in Crane v.

Commissioner.

(t] he words of statutes including

revenue acts-should be interpreted

where possible in their ordinary,

everyday senses.

This Court went even further in lay-

ing down principles to apply to the con-

struction of words in a gee Fim Old

Colony R. Co. v. Commissioner when it

ordered:

277 331 U.S. 1,6 (1946)

28/ 284 U.S. 552,560 (1931)

~-26<

If there were doubt as to the con-

notation of the term,and another

meaning might be adopted,the fact of

its use in a tax statute would in-

cline the scale to the construction

most favorable to the taxpayer. Gould

v. Gould, 245 U.S. 151,153 (1917).

The Court has also repeatedly spoken

out strongly against any "extension by im-

plication beyond the clear import of the

language used."~~’ The most quoted example,

relative to a court's not sanctioning re-

peal by implication of a right or privilege,

is contained in United States v. Borden

30/

Co. in which the Court stated:

It is a cardinal principle of con-

struction that repeals by implication

are not favored...The manifest intent-

ion of the legislature to repeal must

be clear and manifest. (Emphasis add. )

The Court of Appeals for the Ninth

Circuit's interpretation of the legisla-

tive history of remedial section 152(e)

perpetuates a myth created by the respond-

ent and the United States Tax Court, in

297 United States v. Merriam (263 U.S.179,

187-188(1923. )

30/ 308 U.S. 188, 189 (1939).

their effort to extend the applicability

of the remedial section to cover persons

other than divorced parents,despite the

aforementioned unambiguous exclusion in

the legislative history of any ‘third

person from being affected by the Act; a

similar exclusion in Treasury Regulation

Sicites.” end.ncct important of all,

the retention of dependency exemptions for

stepchildren by stepfathers in both the

statutory and regulatory dependency scheme.

The myth created is that a ‘divorced

woman' retains,for tax purposes,that de-

Signation,even after she remarries and

that her children remain ‘children of

divorced' parents.

The Internal Revenue Code does not

recognize that aberration. For tax pur-

poses,the Code considers a divorced woman

who remarries to be the wife of her new

Spouse and her children to be his

317 See Note 19, supra.

-28-

stepchildren. The Code permits the new

spouse and his wife to file a joint tax

return 32! ad for the new spouse step-

father to take his stepchildren as depend-

ent deductions. The applicable Treasury

regulations do likewise.

What respondent;Tax Court;and the

Ninth Circuit have done here is to try to

"wrench a meaning" out of the legislative

history to support their position: that

Congress in section 152(e),intended to

bind stepfathers to agreements previously

entered into by the divorced parents.They

intend to enforce such a result on the

petitioner, even though he was not a party

to,or benefeciary of,the agreement; had no

knowledge of the agreement until he re-

ceived a tax deficiency notice in May 1981

from respondent; nor knew the parties until

five years after they had entered into

33 /

their contractual arrangement. Such a

32Z/ Section 6013(a),(see App.B,infra,p.4b)

See Stipulation of Facts #12 ,App.A, infra,

O74.

-29-

novel attempt runs counter to all stat-

utory and common law principles of con-

tract law.

This Court has indicated that it will

not tolerate the witholding of tax benefits

from a taxpayer,especially if the tax stat-

ute clearly and unequivocally giv~s the

taxpayer the right to claim those benefits.

In Lewyt Corp.v.Commissioner the Court

stated on point:

(w]here the benefit claimed by the

taxpayer is fairly within the stat-

utory language and the construction

sought is in harmony with the stat-

ute aS an organic whole,the benefits

Will not be withheld from the tax-

payer. (emphasis added. )

Section 152(e) must be read and be

construed in pari materia with sections

152(a) (e) (1) (3) and 152(a)(2)(9),if the

courts are to support Congress' continued

effort to achieve uniformity in the ap-

plication and enforcement of the tax laws.

This Court underscored the role the

347 349 U.S. 237,240 (1954)

30.

judiciary must play in helping Congress

achieve its desired goal in Weinberger v.

35/

Hynson, Westcott & Dunning when it stated:

It is well-established that our task

in interpreting separate provisions

of a single Act is to give the Act

the most harmonious ,comprehensive

meaning possible in light of legis-

lative policy and purpose. (See also

Helvering v. N.Y.Trust Co., 292 U.S.

455,464 P1533.

The Court of Appeals for the Ninth

Circuit did not follow the above instruct-

ion nor this Court's counsel that all

courts apply and interpret the Inter-

nal Revenue Code uniformly. That prin-

ciple was clearly ~~ in U.S. v.

Olympic Radio & T.V.

We can only take the Code as we find

it and give it as great an internal

Symmetry and consistency as its

words permit.

The Tax Court also,recognized that

petitioner relied on "section 15l(e) and

152(a) (2) when he claimed the dependency

357 Gl2 U.S. 609,631-632 (1973).

36/ 349 U.S. 232,236 (1954)

-31-

exemptions for his stepsons in 1978.

(Petitioner also relied on 152(a)(9) in

the alternative. Respondent stipulated

that petitioner's stepsons “were members

of his household as defined in section

152(a)(9) in 1978," 2) nich would in

addition to section 152(a)(2),permit him

to claim his stepchildren as dependency

exemptions. )

The Tax Court ,however,unconstitu-

tionally deprived petitioner of his stat-

utory andi regulatory right and privilege

by holding that because petitioner filed

a joint tax return in 1978 with his wife,

(the custodial spouse),he was "bound by

the provisions of section 1520} "the Tax

Court realized that it was establishing a

new classification of taxpayers and de-

nying them tax benefits,but expressed the

belief that its action was‘hot arbitrary

377 See App.A, infra, p. Ba.

36/ See App. A, infra, p.29a.

~32-

5 39/

and capricious.

When the Tax Court established a new

classification of taxpayers,and then pro-

ceeded to deprive petitioner of his de-

pendency deductions that Congress had

granted for more than half a century-which

rights and privileges it had not directly

or indirectly repealed as of the date of

the Tax Court's decision-it was not merely

deciding a case; it was unconstitutionally

encroaching on the Article 1,Section 8(1)

plenary taxing powers 6f the Congress. It

is well-settled that no court has the

constitutional authority to make tax law

or deprive taxpayers of rights,privileges,

and benefits that Congress has constitu-

tionally granted.

In addition,the curious holding of

the Tax Court impermissibly inflicted a

penalty on the petitioner for filing a

joint tax return. The Tax Court itself

39/7 SeexRpp.A, infra, p.2Za.

<0.

has stated that its "cases hold that the

acceptance of the privilege of filing a

joint return by married couples carries

with it no denial of the individual rights

under the statute,and that Congress has

enacted no penalty for the privilege it

has granted ey, the Commissioner may not

enact one." (emphasis added. )

The Court of Appeals for the Ninth

Circuit likewise noted that petitioner

claimed dependent deductions for his step-

sons for 1978 under the authority of sec-

tiong 26 USCA 15l(e) and 152(a). “(The

Ninth Circuit also did not refer to pe-

titioner's alternate claim under section

152(a)(9) or that the respondent had re-

cognized that claim in the Stipulation of

Fact.) /

The Court of Appeals for the Ninth

GO7 Charles F. Fawsett v. C.I.R., 31 B.T.A.

41/ See App. A, infra, p.3a-4q.

42Z/ See App. A, infra, p.33a.

-34-

Circuit,evidently realizing that the re-

spondent's and Tax Court's position con-

tained a fatal flaw which neither of them

had satisfactorily overcome,decided to

review the case de —

The Tax Court had noted the threshold

requirement of the remedial section 152(e)

i.e., section 15140) (1)0) and Treasury

Regulation 1.152-4(a)

The Tax Court,at first,tried to sat-

isfy that requirement by reasoning which

has been discredited by statute,treasury

regulations and case law: e.g., that a

husband could not take a deduction in his

own right on a joint tax return. The Tax

43/ See App.A, infra, p. 3a.

Z4/ See App.B, infra, p. 3b - Section 151

(e)(1)(A) requires the divorced parents to

provide more than half of their children's

Support during the calendar year before the

non-custodial divorced parent can reach the

benefit in section 152(e)(2)(A) permitting

him to take the children as dependent

exemptions.

45/ See note 19

~35-

46/

Court's use of Taft v. Helvering ~ and

477

United States v. Allen, was erroneous

and misplaced.Petitioner cited decisions

of this Court;the Ninth Circuit; other

Circuits; and Tax Court decisions; as well

as section 6013(d) 48) ond Treasury Reg-

ulation 1.6013-4(b)"~ in opposition.

The Tax Court tried to overcome the

respondent's stipulation that petitioner

had provided over one-half of the chil-

dren's support by indicating that his

Support came from community earnings .What

the Tax Court evidently did not realize is

that there is no division of community

earnings until either separation,divorce,

or death occurs. During the marriage,

467 311 U.S.195 (1940).

47/ 551 F.2d 208 (8th Cir. 1977).

Z8/ See App. B, infra, p. 4b.

/ See App.B,infra 12b-Section 1.6013-4(b):

If a joint return is made,the gross income

of husband and wife are computed in the ag-

gregate basis...Although there are two tax

payers on a joint return,there is only one

taxable income.The tax on the joint retum

shall be computed on the aggregate income.

> th.

either spouse can spend his earnings as he/

she sees fit. (Of course spousal support

must be provided.) Also,the Tax Court

ruled that state community property laws

cannot be used to deny a federal taxpayer

of rights and privileges Congress has be-

50/

stowed on him. In Morgan v. Commissioner _

the Court stated:

[r}¢ it is found in a given case that

an interest or right created by local

law was the object intended to be tax-

ed,the federal law must prevail no

matter what the name is given to the

interest or right by state law.

(emphasis baaee}

The Court nannansncea: ¥ that po-

sition in Burmet v. Harmel. _

Here we are concerned only with the

meaning and application of a stat-

ute enacted by Congress,in the exer-

cise of its plenary power under the

Constitution,to tax income. The ex-

ertion of that power is not subject

to state control... (the will of the

Congress) is to be interpreted so as

to pive a _un*form apelLication to a

nationwide scheme of taxation.

(emphasis added.)

507 309 U.S. 78,81(1939)

51/ 287 U.S. 103, 110 (1932)

52/

In a later case, Lyeth v. Hoey, the

Court declared on point:

(tT Ihe question as to the construction

of the exemption in the federal stat-

ute is not determined by local Law.

(emphasis added. )

Petioner has quoted the above three

cases relating to the Community property

issue, (there are many others) ,because the

Court of Appeals for the Ninth Circuit

stated in its conclusion that it had not

reached the issue,"whether half the sup-

port provided by (petitioner) should be

attributed to (petitioner's then wife) /

under California's community property laws.”

The Court of Appeals for the Ninth

Circuit then attempted to surmount the

fatal say by relying on Revenue Ruling

78-91 ~—=to support

53/ See App.A,infra,p.a.

54/ (1978- 1CB36) See oo B,infra,p. /3b.

Rev.Rul. 78-91 states in relevant parts:

The support Fumasehed be | the new spouse

will be treate? o6 sh nae by the di-

vorced (custodial #3} ; pouse for Dur oses of

section 8302) (4) n determining whether

(Footnote continues on next page)

~38-

55/

its opinion, notwithstanding the fact

that this court has given little weight to

the respondent's revenue rulings,especially

if they did not carry out the Congressional

intent or conflicted with the overall stat-

utory and regulatory scheme.

The Court has stated that position

consistently and without sacegtiin. In

56/

Commissioner v. Idaho Power Co.

the Court declared:

(A revenue ruling) fi}s a legal opin-

ion within the agency,not a Regula-

tion or Treasury Decision. It is with-

out force when it conflicts with an

Act of Congress.

Here, Revenue Rule 78-91 conflicts

with 26 USCA 151(a)(e)(1)(3) and 152(a) (2)

or (9) and makes it forever impossible for

petitioner and stepfathers similarly sit-

uated to claim their stepchildren as de-

pendent deductions,even though they can

prove that they provided more than half of

areyts conte ribbte ed over eit of ns eRITe*

Ss support or the cal “h dar year.

55/ See App.A,infra 5a-Ja

56/ 418 U.S. 1 22 (1995)

o9D

their support during the taxyear in ques-

tion.

This Court has ruled that the Commis-

sioner "goes beyond routine and exceeds

his statutory power" when he promulgates

a revenue ruling interpreting a Treasury

regulation. 1) Revenue Ruling 78-91 con-

flicts 7" applicable Treasury Regula-

tions.

In Rowan Cos. v. United States the

Court struck down a Treasury Regulation.

(to which it traditionally gives much

weight.) The Court held the regulation

invalid because it "fail(edy' to implement

the Congressional mandate , a consistent

and reasonable manner." _

In this case, Rev. Rul. 78-91 fails

to implement in a reasonable manner the

Congressional mandate in the legislative

577 See e. Bartels v.Birmingham, 332 U.S.

126- -132(194 6) an ecurity Bd.v.

BET ene -" “

5B 1/15i- “is ); ,2(a)(b), (a)

T1538 -1(a) (1), (29 (1), (b), (c) ;1.152-4a.

59/ 452 U.S. 247,253 (1980)

40-

history of remedial section 152(e) to ex-

clude ‘third persons’ from its applicabi-

lity. To the contrary,Rev.Rul.78-91 frus-

trates the Congressional mandate and makes

it impossible for ‘third person' step-

fathers,similarly situated to the peti-

tioner, from enjoying the dependency ex~

emptions granted by the Congress.

Revenue Ruling 78-91 does violence to

the statutory and regulatory dependent ex-

emption scheme and destroys the uniform-

ity of the threshhold requirement for all

taxpayers who claim dependent deductions,

e.g., that the claimant must show he pro-

vided more than half of the dependent's

Support during the calendar year.

This Court has determined that "re-

venue rulings provide little aid in inter-

preting a tax statute. Helvering v. New

60/

York Trust Co., 292 U.S. 455,467-468(1933)."!

607 Biddle v. Commissioner, 302 U.S.

41.

Opposite to that determination is the

Ninth Circuit's view that revenue rulings

can"aid the court's interpretation of the

dependency exemptions in the instant case

by pointing out the trend of opinion "Te

administrators familiar with tax laws!"

The self-serving interests of the

respondent Commissioner,to enable him to

achieve an impermissible purpose for the

sake of administrative convenience ,does

‘not commend him as an impartial,objective

source of the "trend of opinion among

administrators. "

This Court has asserted that any

regulation (or revenue ruling) which

attempts to disallow a deduction is nec-

cessarily invalid. $2/

Even the Tax Court has placed little

reliance on revenue rulings.In Estate of

a) App.A,infra,p,&@.

See e. 8 Trust of Bingham v. Comm'r

325 U.S.36 377(1944)and cases cited therer

it.

Late ‘f pee Be Mises F stat mee faa i

ess a

as : eters: ence

le Oy car Ey Pe eee Tet A Oe SE a peers eee ee

a . aul ae

‘

ae : ; } is | ine

~8 x Par : |

| mak) :

i a

7 fr

i ”

7 ) _ , m ne

yrs <4 a

63/

Grace E. Lang, that court stated:

A revenue ruling,without more,of —

course is simply the contention of

one of the parties to the liti-

gation,and is entitled to no great-

er weight.

In note 4 of Lang, supra, the Tax

Court goes on to declare:

Revenue rulings,unilaterally issued

by respondent (Commissioner) do not

rise to the dignity of those "rules

and regulations" which under the

authority of sec.7805(e) are pres-

cribed by respondent” with the

approval of the Secretary. Sec.

301.7805-1(a) ,Proced.Admin.Regs.

Petitioner submits that Rev.Rul.78-91

was unilaterally issued by respondent and

does not rise to the dignity of the Trea-

Sury regulations,with which it directly

conflicts ,and therefore should be con-

sidered null and void. (See e.g., Trust

of Bingham, supra, page 40.)

64/

The Tax Court in D.B.Anders stated:

(a) revenue ruling is no more than

637 04 T.C. 404,406,47 (1975)

64/ 48 T.C. 815,821 (1967)

aise

the expression of the opinion or

position of the Internal Revenue

Service with respect to the law

applicable to the facts recited

therein and does not have the force

of law.

Other Circuits prefer to = an the

statutes and not revenue rulings. _

Petitioner has cited these cases

to show the low rating and significance

courts generally assign to revenue rulings.

Yet the Court of Appeals for the Ninth

Circuit would base its opinion largely on

the strength of Revenue Ruling 78-91.

Absent that revenue ruling,the opinion of

the Ninth Circuit in the instant case

would have very little,if any validity.

Petitioner contends that Rev.Rul.

78-91 is a thinly disguised attempt to

circumvent and frustrate existing depend-

ency deduction statutes and applicable

657 Stubbs Overbeck v.United States 445F.2d

TT42(t ims v. United States

252 F.2d 434, (4th Cir. a

108 (1959)United States v. Bennett, 186 F.2d

407(5th Cir.1951)in which Chief Judge

(Footnote continued on next page)

-44-

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ere an eee ok ar =

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: ae 4 , ;

ie One a, I 7

ae af - ° ae 7 x a . es a) a ; 7 7 f is

re | ai 7 Jun P ay ‘ > - aa iw . ,

Ls “BOA Bare Aw Riggtera ee ie

- - . — ; - 7 7 ‘> am ; a $

tee ee, ae L eae ye Pee ae ar

ay : oy Lee at?e 6. FY =" ee , et “FoF LcLE a Baek, te

aie 7 ae ae : ion - ae ede a F fa i

By Pay aics ee

a an

; = i ry

A Ns PS ose Ag PA

regulations,as heretofore pointed out,as

well as the intent of the Congress,as ex-

pressed in the legislative history of re-

medial section 152(e). It is a serious

and unconstitutional encroachment on the

Article I, Section 8(1) plenary taxing

powers of the Congress. Rev.Rul.78-91,in

effect ,impermissibly establishes 2 class-

ifications of stepfathers, e.g.:

(1) Stepfathers who have married divorced

women with children,which divorced wom-

en have no written agreements with

their ex-husbands permitting them to

take the children as dependency ex-

emptions. Such stepfathers can take

their stepchildren as dependent de-

ductions.

(2) Stepfathers who have married divorced

(Footnote from previous page)

Hutcheson stated that a revenue ruling

had "no more binding or legal force than

the opinion of any other lawyer."

;

women with children who have such

agreements. Such stepfathers,because

of Rev.Rul.78-9l1,can never take their

stepchildren as dependent deductions

since Rev.Ruling 78-91, states that

they have provided no support at all,

whereas,in fact,they may have actual-

ly provide more than half of the sup-

port.

Petitioner believes that Rev. Rul.

78-91 unconstitutionally deprives him,and

countless others similarly situated,of

the property they have gained, (i.e. ,tax

benefits),in the good-faith exercise of a

specific ,unequivocel,vested right and

privilege granted by the Congress in the

exercise of its Article I Section 8(1)

plenary taxing powers. Such an unwarranted

deprivation of property appears to be a

violation of petitioner's Fifth Amendment

guarantee to due process and equal pro-

tection of the laws.

-46 -

This Court addressed such a denial

by a governmental agency of rights and

benefits granted by the Congress to a

class of citizens in Jiminez v. Weinberger

66/

by stating:

[r] Jo conclusively deny or.e subclass

enefits presumptively available to

the other denies the former of the

equal protection of the laws guar-

anteed by the due process provisions

of the Fifth Amendment.

It should be remembered tnat it is

not the Congress making these classifica-

tions,but a governmental agency. The pe-

titioner is well-aware that tax benefits

are a matter of legislative grace and not

a right. However,petitioner maintains that

only the Congress can repeal a right and

privilege it has granted,and not the re-

spondent Commissioner.

This Court has often admonished exec-

utive agencies not to encroach on the leg-

islative powers of Congress. In

667 GIT U.S. 628, 94 S.Ct.2496(1974)

ob Fa

Manhattan Gen. Equip.Co. v. Commissioner,

o//

this Court clearly laid down the prin-

ciple to be followed by administrative

agencies:

The power of an administrative

officer or board to administer a

federal statute and to prescribe

rules and regulations to that end

is not the power to make law-for

no such power can be delegated by

Congress...A regulation which does

not do this,but operates to create

a rule out of harmony with the

statute is a mere nullity.

Petitioner asserts that Rev.Rul. 78-91

is a rule "out of harmony" with the entire

statutory and regulatory dependency exemp-

tion scheme,including remedial section

152(e) and prays that this Court will de-

clare it to be a “nullity”. This blatant

attempt by the respondent to circumvent

federal tax statutes and Treasury regula-

tions through the stratagem of a revenue

ruling should be dealt with in an appro-

priate manner.

677 297 U.S. 129,134 (1936)

=48~

Diligent research by petitioner,a

third year law school student,has not

revealed a similar example of an executive

agency of the federal government attempt-

ing to thwart Congressional statutes and

Treasury Regulations by the stratagem of

a revenue ruling,-which establishes class-

ifications of citizens, causing them

to be deprived of property gained from the

good-faith exercise of a clear and un-

ambiguous,vested right and privilege,con-

stitutionally granted by the Congress,and

upon which they justifiably relied.

Petitioner prays that this honorable

Court will respond to respondent's uncon-

Stitutional legislative act,as well as

the sanctioning of that act by a United

States Court of Appeals for the Ninth Cir-

cuit. The impact of the Ninth Circuit's

decision in the instant case extends far

beyond harm to the petitioner, and count-

less others similarly situated. Nor are

=49

the harmful consequences of that court's

decision confined to the tax area. If

allowed to stand,the decision below will

have a far-reaching impact in the conduct

of ail agency rulemaking proceedings un-

der 5 USCA 8 553.

In a subsequent case, Greene v. Mc

68 /

Elroy, the court cautioned that:

[without explicit action by law-

makers,decisions of Constitutional

import and effect would be relegated

by default to administrators,who,

under our system of government are

not endowed with authority to decide

them.

The Opinion of the Court of Appeals

for the Ninth Circuit in the instant cause

must be judged as an attempt to provide a

veneer of respectability to an obvious un-

constitutional encroachment by the respon-

dent on the Article I, Section 8(1) (18)

taxing powers of the Congress.

When the Ninth Circuit upheld and

sanctioned Revenue Ruling 78-91 it, in

687 360 U.S. 474,507 (1959).

7 -50-

effect,also usurped Congress' plenary power

to lay and collect taxes thus grievously

violating the Doctrine of Separation of

Powers,so deeply ingrained in our politi«

cal and judicial system.

The Court of Appeals for the Ninth

Circuit has,by its decision,authorized the

establishment of classifications of tax-

payers resulting from respondent's pro-

mulgation and enforcement of Rev.Rul. 78-91,

and the deprivation of petitioner's,and

numerous other taxpayers',property gained

from availing themselves of tax benefits

granted in the Internal Revenue Code.

Petitioner contends that Rev.Rul.78-

91,is unconstitutional on its face and as

applied to petitioner,and should have been

struck down by the Court of Appeals for

the Ninth Circuit,and the respondent Com-

missioner directed to the Congress for any

relief he felt necessary and appropriate

under the circumstances.

This Court has set the course for

lower courts to follow when the respondent

Commissioner seeks a federal court's as-

sistance to accomplish a purpose which on-

ly the Congress can provide.

In United States v. Byrum this

Court declared on point:

Courts properly have been reluctant

to depart from interpretation of tax

law which has been generally accept-

ed when the departure could have far-

reachirp consequences. When a princi-

ple of taxation requires examination,

Congress is better equipped than a

court to define precisely the type of

conduct which results in tax conse-

quences. (emphasis added. )

The Court of Appeals for the Ninth

Circuit demonstrated that it adhered to

this Court's directive in Byrum, supra,

when it “eo in a recent case; C.I.R. v.

Greenspun.

{(w)hen_ a principle of taxati -

quires examination,Congress is better

equipped than a court to define pre-

cisely the type of conduct which re-

sults in tax consequences. (emph.add.)

697 408 U.S. 125,135 (1972)

70/ 670 F.2d 123,126 (1982)

o$2~

Petitioner believes it is reasonable

to ask why the Ninth Circuit did not sim-

ilarly direct respondent to the Congress

in the instant cause? Certainly,the peti-

tioner's clear and unambiguous vested

right and privilege under the Internal

Revenue Code merited such action by the

Ninth Circuit-especially since Congress

had never directly or indirectly repealed

the long-standing dependency benefits. Cer-

tainly,there were "far-reaching conse-

quences” involved here and Congress was

better equipped than the court to modify

a tax benefit that had been so deeply en-

trenched in the dependency exemption sche-

me. The court should not have taken it

upon itself to sanction the establishment

of a classification of taxpayers and to

uphold the deprivation of benefits flow-

ing from that classification.

If the Ninth Circuit's judicial ac-

tion was taken for the administrative

-53-

convenience of the respondent,then it

would have been in contravention of the

following principles laid down by this

71/

Court in Frontiero v. Richardson:

{wlhen we enter the realm of "strict

judicial scrutiny;' there can be no

doubt that “administrative conve-

nience” is not a shibboleth,the mere

recitation of which dictates consti-

tutionality. Stanley y.Illinois. 72/

This Court also reflected in a case

many years ago:

Clearly,if the federal courts give

way to the "seductive call of ex-

pediency”urged by administrators

for the sake of administrative con-

venience,then surely the vital guar-

antees of our Constitution and rights

and privileges granted by the Congress

will be reduced to nothing more than

a "form of words.” 73/

It may be true that this case only

involves $523.00 plus interest and is

being litigated by only a pro se (albeit

a third year law school student),but the

issue involved is of paramount importance

7, 690-691 (1972)

717 GIl U.S. 67

77/ 405 U.S. 645,656 (1972)

73/ See e.g. Silverthorne Lumber Co. v.

~~ United States, 251 U.S. 385,392 (1919).

sh.

because a federal court of appeals was

being asked to decide whether an executive

agency could make tax law,or decide tax

benefits,or repeal of tax benefits.

Another dimension has been recently

added to this cause,which indeed makes it

a case of first impression. Finally,seven-

teen years after the enactment of remedial

152(e),the respondent Commissioner-no doubt

fearing that petitioner would probably pre-

vail in the instant case because his posi-

tion was legally correct-decided to do

what he should have done in the first in-

stance: e.g.,go to the Congress for any

assistance he deemed necessary and appro-

priate.

Congress,at the request of respon-

dent Commissioner,has just enacted the Tax

Reform Act of 1984,Public Law 98-369,ef-

fective January 1,1985.- Section 423 of

that Act, amends remedial section

747 See App.B,infra,pp.5b-"b.

-55-

152(e). The new section 152(e)(5) provides

what the Commissioner tried to unconstitu-

tionally accomplish by the device of Rev.

Rul. 78-91 in 1978,

This new subparagraph conclusively

proves the position that the petitioner

has advanced throughout these proceedings:

e.g.,that in 1978 he had a statutory and

regulatory right and privilege to take his

stepsons as dependent exemptions. Those

rights and privileges have and will exist

until January 1,1985. For the first time

since 1967,when the remedial statute

was enacted,Congress has seen fit to set

up two classifications of stepfathers:

e.g.,some who will be able to claim de-

pendent exemptions for their stepchildren

and countless others who will not. There

75/7 See App.B,infra p.1b

Section 152(e)(5) now provides:

(5)Special Rule For Support Received From

New Spouse of Parent-For purposes of this

subsection,in case of the remarriage of a

parent , support of a child received from

parent ’s spouse shall be treated as re-

ceived from the parent.

-56-

bs city

. a ‘'

. . _ ,

exsre.

‘

. a - tae

* 7

‘

is ¥ = ——.

= ’

‘ ayn

~ ; ° .

4 " :

: 4

bh. <

mee)

can now be no doubt that the Opinion of

the Court of Appeals for the Ninth Cir-

cuit was clearly erroneous and arbitrary

and infringed on the plenary taxing powers

of the Congress. Congress has once again

demonstrated that the tax benefits it

gives can only be rescinded by the Congress.

It should be readily apparent that a

ruling by the Court before January 1,1985

is urgently needed to prevent the federal

court system from being inundated with

cases filed by millions of stepfathers

who may suddenly receive deficiency notices

from the respondent Commissioner for the

past three years,when respondent attempts

to enforce the new amendment retroactively.

As required by statute,the respon-

dent must maximize tax collections in any

manner he can. Whereas,in the past he has

abided with both stepfathers and non-cus-

todial spouses taking the same deductions,

and only taking action when a noncustodial

spouse,still bitter against his ex-wife,

reported his suspicion that the new spouse

was also taking the benefit; or if a sin-

gle non-custodial spouse reported children

on his tax return and was examined as to

the authenticity of the deduction-it can

now be reasonably anticipated that the

respondent Commissioner will utilize his

new-found legal ability to the utmost.

It must be assumed,judging from the past,

that respondent will pursue this new found

source of tax revenues with his character-

istic vigor and enthusiasm.

To gain the maximum results, the res-

pondent will have to enforce the new amend

ments retroactively. The retroactive ap-

plication of tax amendments is a grey area

in the law. Although the Court has taken

the position in several cases against re-

trospective operation of tax laws or amend-

ments,it has couched that position with

qualifying language.

a56 o

In the seminal a Vv.

Laramie Stock Yards, the Court stated:

t]he first rule of construction is

that legislation must be considered

as addressed to the future and not

to the past...{a] retrospective

operation will not be given to a

Statute which interferes with ante-

cedent rights or by which human ac-

tion is regulated,unless such be

"the unequivocal and inflexible ip-

port of the terms,and the manifest

intention of the legislature."

| (See also Greene v. United States,

376 U.S.149,160(1963) . (Emph. Added. )

In Claridge Apartments Co. v. Comm'r.

the Court stated:

77/

Retroactivity,even where permissible

is not favored,except upon the clear-

est mandate. (emphasis added. )

— United States v.Estate of

Donnelly the Court declared:

Deviant rulings by circuit courts of

appeals,particularly in apparent

dictum,cannot generally provide the

"Justified reliance” necessary to

warrant witholding retroactive ap-

plication of a decision construing

a statute as Congress intended it.

FAM | RCS De! nla TR:

| 77/ 323 U.S. 141,164 (1944

| 78/ 397 U.S. 286,295 (1969

«YT FITS. 190,199 B38):

-59-

A further ‘'greying' of the retro-

activity question occurs when seeking to

~} las Bradley v. Richmond School Board.

~~ In that case the Court stated:

We anchor our holding in this case

on the principle that a court is to

apply the law in effect at the time

It renders its decision,unless doing

So would result in manifest injustice

or there 18 a4 statutory direction or

legislative history to the contrary,

The Court went on to say in Bradley,

supra:

The second aspect of the Court's

concern that injustice may arise

from retrospective application of a

a in law gelates to the nature

of the rights,effected by the change.

=ucerven =e cree ige to a pending ac-

tion where it has concluded that t

do 60 Will infringe u or deprive

a person of a r

or become uncond - See oreene

Vv. Uni tates, U.S. at :

er Uome :

Pacific R. Co. v v. Larante Sock Yards

Co., U.S. ’ Emph.A d.)

The respondent Commissioner will sure-

ly take the position that Congress has

757 GI6 U.S. 696, 711 (1973)

-60-

wee

clearly indicated in the Section 423

amendment to section 152(e) that it in-

tended it to be retroactive. On the other

hand,millions of stepfathers will take the

opposite position. It will be left for the

federal judiciary to decide countless

cases that will certainly arise on this

very issue. Those courts will have to de-

cide Congress’ intention,since there ap-

pears to be no legislative history avail-

able on this particular section. (Peti-

tioner called the staff of the Joint Con-

ference Committee of the Senate Finance

Committee and the House Ways and Means

Committee,and the staff of House Ways and

Means Committee. He was told by a staff

member of both Committees that there was

no legislative history on the Section 423

amendments. )

The federal courts will have to de-

cide under different factual circumstances,

in numerous cases,whether the retrospective

61-

9 — ~~ = =.

application of the Amendments would "re-

sult in a manifest injustice." 80/

Petitioner respectfully suggests that

the arguments in his petition for writ of

certiorari conclusively prove that neither

the respondent Commissioner nor the Court

of Appeals for the Ninth Circuit have a

constitutional right to legislate class-

ifications of taxpayers and then proceed

to deprive them,and him,of a specific and

unequivocal,vested right and privilege,

constitutionally granted by the Congress,

especially when applicable Treasury reg-

ulations clearly and unambiguously define

that right and privilege.

Petitioner edditionally suggests that

the information now supplied to this Court

clearly demonstrates that the Court of

Appeals for the Ninth Circuit decided the

pure federal question of law in this case

in a way in conflict with applicable

Bradley v.Richmond School Board

-62-

decisions of the Supreme Court. The cases

cited in this petition, (and many more),

were the same cases that were placed on

the record and made available to the Ninth

Cireuit, except for the cases on retro-

activity.

Finally, petitioner submits that the

federal judiciary and the executive branch

of the federal government are responsible

for ensuring that constitutional and stat-

utory rights, constitutionally granted,

are respected. This has not been done by

the respondent Commissioner or the Court

of Appeals for the Ninth Circuit in this

case. Not only have they not respected

those rights, they have unconstitutionally

taken them away from petitioner.

///

aie

CONCLUSION

Petitioner respectfully submits that

in view of the importance and simplicity

of the questions presented;the lack of any

doubt as to the purpose and the intent of

the Congress when it enacted remedial

section 152(e) in 1967;and the urgency of

an early decision in order to avoid a mul-

titude of similar lawsuits on the questions

now presented,the petition for a writ of

certiorari should be granted and the judg-

ment. of the Court of Appeals for the Ninth

Circuit be forthwith reversed,with instruc-

tions for such further proceedings as may

be necessary,consistent with interpreta-

tion of applicable statutes and regula-

tions which grant stepfathers the right

and privilege to claim their stepchildren

as dependency exemptions.

If ,however,this petition should be

granted but the Court should determine

that oral argument is required,it is

~64-

respectfully requested that the cause be

placed on the Summary Docket and advanced

for argument before January 1,1985 and,

that in the interest of the earliest pos-

sible hearing,this petition be accepted as

the brief of petitioner on the merits.

Respectfully submitted,

DATED: October 22,1984.

MAX SCHNEIER, Pro Se

4150 Via Dolce # 224

Marina del net Ca. 90292

(213) 823-747

t65~

APPENDIX A

OPINIONS, DECISIONS, ORDERS AND

STIPULATIONS OF FACTS BELOW

FOR PUBLICATION

FILED

JUN 15 1984

PHILLIP B.WINBERRY

CLERK,U.S.COURT OF APPEALS

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

. MAX SCHNEIER,

VEZ

Petitioner-Appellant, )

vs. No. 83-7533

COMMISSIONER OF Tax Court No.

INTERNAL REVENUE, 5 8277-82

Respondent -Appellee. OPINION

)

Argued & Submitted: June 6, 1984

Appeal from a Judgment of the Tax Court

Before: WRIGHT,FERGUSON,and REINHARDT,

Circuit Judges .WRIGHT, Circuit Judge:

l(a)

We consider here whether 26 U.S.C.

§ 152(e)(2)(A) prevents a stepfather from

claiming dependent exemptions for his step-

children even though he provided over half

their support.The tax court upheld the

Commissioner's determination that the nat-

ural father was entitled to the exemptions

pursuant to a divorce decree under which he

made the required support payments.

FACTS

Prior to 1978,Judy Schneier divorced

her first husband,Stephen Stackel.The sep-

aration agreement provided that,if Stackel

made the required support payments,he

could claim dependent exemptions for their

two children.During 1978,Stackel paid

$5,600 for child support.He claimed the

exemptions for both children for that

year. |

In 1978 Judy Schneier was married to

appellant,Mr.Schneier. Her children lived

with them during that year,and Schneier

2(a)

provided more than half of the children's

support. Schneier also claimed exemptions

for the children on the marital community's

joint 1978 return.

The Commissioner disallowed the

Schneiers' dependent exemptions and as-

sessed a deficiency of $523. Only Mr.

Schneier filed a petition for redeterm-

ination in tax court,apparently because he

and Mrs.Schneier were separated or di-

vorced when the Commissioner assessed the

deficiency determination,and Schneier

appealed.

ANALYSIS

This case requires us to interpret the

dependency exemption provisions of the

Internal Revenue Code,26 U S.C.88 151-152.

There are no disputed issues of fact. We

review the tax court's legal conclusions

de novo. Confederated Tribes v.Kurtz,

691 F.2d 878,880 (9th Cir.1982),cert.de-

nied, 103 S.Ct. 1433 (1983).

3(a)

Section § 15l(e) provides an exemption

for each of a taxpayer's dependents.For

purposes of this section, a taxpayer must

provide over half the support of any de-

pendent during the calendar year in order

to claim the exemption. 26 U.S.C. § 152(a).

Section 152(e) provides .-special rules

for determining who provided support for

a child of divorced parents. The non-

custodial parent may claim an exemption

for a child if: (1) the divorce decree or

a written agreement so provides;and (2)

the noncustodial parent pays at least $600

in support for that child during the year.

Id. at (e)(2)(A). Section 152(e) applies

only if the child's parents separately or

jointly provide over half of his or her

support. § 152(e)(1)(A).

Here,the IRS and the tax court deter-

mined that Stackel,not Schneier,was en-

titled to claim exemptions for the chil-

dren. Schneier contends that section 152(e)

4(a)

I a eee eee 2, ~ a =

; pia i ay ake pM hel eS

; . ; 7% : ; ) c yt: SP Pie Sor le erat ee | ne

* " s = t Oar. , 7

; j al 1 Py ' A eee { ie

= ua é ; A ¢ aan a’ ‘

4 a : i ea deat ‘ - ; *

4 < et : 1 B45 i

4 3 Ps i 7 : ‘ ;

, 4 gack » i i 4 a : j

‘a = €.97 7 a 4 n

he a) r » . o S :

i - : ;

as.

;

nde

= 2 er as

was incorrectly applied because he, not

the children's natural parents,provided

over half the children's support in 1978.

Neither section 152(e)nor the accom-

panying regulations discusses whether 4

stepparent's support is attributed to his

or her spouse,who is a natural parent,for

purposes of determining ietene parents

provide more than half of a child's sup-

port. No court has squarely addressed

the issue.

The Commissioner has determined that

child support furnished by a stepparent

is attributable to the parent-spouse for

purposes of section 152(e). Rev.Rul.78-91,

1978-1 C.B. 36. Under this interpretation,

section 152(e) applies when parents and

their new spouses furnish over half of

a child's support, even though a step-

parent actually furnished more than half

of the child's support. Id.

The 1978 revenue ruling reversed an

5 (a)

earlier ruling,Rev.Rul,71-19,1971-1 C.B.

43,which adopted Schneier's position.

The Commissioner had already revoked the

earlier ruling and had held that the

stepparent's support would be attributed

to the spouse for the purpose of meeting

the section 152(e)(2)(B) support require-

ment.Rev.Rul. 73-175 ,1973-1 C8. as

Because the Commissioner promulgated

Rev.Rul. 78-91 before Schneier filed his

return, Rev.Rul.78-91 governed Schneier's

1978 exemptions. See also 26 U.S.C. 8 7805

(b); Manocchio v. Commissioner, 710 F.2d

1400 ,1403 (9th Cir.1983) (revenue rulings

presumed retroactive unless Commissioner

specifically states otherwise).

Revenue rulings do not have the force

of law. Confederated Tribes v. Kurtz,691

F.2d at 881 n.2.They aid our interpreta-

tion of the dependency provisions, however,

by pointing out "the trend of opinion among

administrators familiar with the tax laws."

6 (a)

Id.

We agree with the Commissioner's hold-

ing in Rev.Rul. 78-91. Congress enacted

section 152(e) in 1967 to remedy problems

existing with the prior system,which

awarded an exemption for a child to the

parent who could prove that he or she

provided more than half of the child's

support. See S. Rep. No. 488, 90th Cong.,

lst.Sess. 2-3, reprinted in 1967 U.S.

Code Cong. & Ad. News 1527,1528-30.

Congress noted that the old scheme

created difficult problems of proof,often

made the IRS an arbiter between angry

divorced parents, and unduly clogged ad-

ministrative machinery with many cases

involving small amounts of money. To

permit stepparents to circumvent section

152(e) by proving that they, not the

parents,provided over half the children's

support would resurrect the problems that

led Congress to enact section 152(e).

7 (a)

"An interpretation so completely at vari-

ance with the declared legislative pur-

pose should not be adopted unless requi-

red by the plain terms of the statute."

Colton v. Commissioner, 56 T.C. 471, 475

(1971).

Moreover, Congress enacted section 152

(e) (2) (A) so that state inane could take

the dependent exemptions into account when

making financial arrangements between

divorcing parents. See S. Rep. No. 488,

Supra, at 3-4. See generally Boucher v.

Commissioner,710 F.2d 507,512 (9th Cir.

1983) (parties have great freedom to de-

termine tax consequences of divorce).

This purpose would be frustrated by per-

mitting a parent's new spouse to claim

the exemption.

One child may in a few instances pro-

duce more than one exemption. See 26 U.S.C.

§ 15l1(e)(2) (married child filing sepa-

rately may be claimed as dependent and

8 (a)

may claim personal exemption) ;Martino v.,

Commissioner, 71 T.C. 456,464(1978) (same

is true if married child files joint re-

turn solely to obtain refund); 26 C.F.R.

8 1.152-1(c) (student child may be claimed

as dependent and may claim personal

exemption). ;

Our situation is not eastogous. In

none of the instances in which a single

child produces two exemptions does that

child produce two dependent exemptions.

Moreover,if the parents had not been

divorced,only one exemption could be

claimed for each child. See 26 U.S.C.8

151(e). Congress has not manifested an

intent to permit more than one dependent

exemption to be claimed for a child sin-

ply because his or her parents are di-

vorced,

CONCLUSION

The tax court correctly upheld the

Commissioner's disallowance of Schneier's

9 (a)

dependent exemptions and deficiency

assessment.

Because of our holding, we do not

reach the issue whether half the support

provided by Schneier should be attributed

to Judy Schneier under Califomia's

community property laws. -.

We have reviewed Schneier's consti-

tutional arguments and find them without

merit.

AFFIRMED.

10 (a)

FILED

JUL 31 1984

PHILLIP B.WINBERRY

CLERK,U.S.COURT OF APPEALS

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

MAX SCHNEIER, d:

Petitioner-Appellant, )

) No. 83-7533

vs. )

) Tax Court No.

COMMISSIONER OF )

) 8277-82

INTERNAL REVENUE, )

) ORDER

Respondent-Appellee.

)

Before: WRIGHT ,FERGUSON,and REINHARDT,

Circuit Judges.

The panel as constituted in the above

case has voted to deny the petition for

rehearing,and to reject the suggestion

for a rehearing en banc.

The full court has been advised of the

suggestion for an en banc hearing,and no

judge of the court has requested a vote

11 (a)

on it. Fed R. App. P. 35(b).

The petition for rehearing is denied

and the suggestion for a rehearing en

banc is rejected.

12 (a)

FILED

AUG 14 1984

PHILLIP B.WINBERRY

CLERK,U.S.COURT OF APPEALS

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

Respondent -Appellee. ING MANDATE

MAX SCHNEIER, ¥

Petitioner-Appellant, No. 83-7533

vs. > Tee ce. ¢

)

COMMISSIONER OF ) 8277-82

)

INTERNAL REVENUE, ) ORDER STAY-

)

Before: WRIGHT, Circuit Judge.

The appellant's motion is granted.

The issuance of mandate will be stayed

for 90 days from the date of filing of

this order,pending timely application

for writ of certiorari within that time.

13 (a)

SERVED JUL 5 1983

T.C. MEMO. 1983-390

UNITED STATES TAX COURT

MAX SCHNEIER, Petitioner v. COMMISSIONER

OF INTERNAL REVENUE, Respondent.

Docket No. 8277-82. Filed July 5,1983.

Max Schneier, Pro se.

Darren M. Larsen, for the respondent.

MEMORANDUM FINDINGS OF FACT AND OPINION

DAWSON, Judge: This case was assigned to

and heard by Special Trial Judge Darrell

D. Hallett pursuant to the provisions of

section 7456(c) of the Internal Revenue

Code oe Rules 180 and 181,Tax Court

Rules of Practice and Procedure. The

All section references are to the Inter-

nal Revenue Code of 1954,as amended,unless

otherwise indicated.

Pursuant to the order of assignment,on

the authority of the "otherwise provided"

language of Rule 182, Tax Court Rules of

Practice and Procedure,the post-trial pro-

cedures set forth in that rule are not

_applicable in this case.

14 (a)

Court agrees with and adopts his opinion

which is set forth below.

OPINION OF THE SPECIAL TRIAL JUDGE

HALLETT, Special Trial Judge: Respondent

determined a deficiency in petitioner's

1978 Federal income tax in the amount of

$523. The issue for decision is whether

a mother and stepfather having custody of

children by the mother's former marriage

may claim dependency exemptions on their

joint return for the children where more

than one-half of the support is provided

from earnings: of the stepfather but the

noncustodial father contributed more than

$600 support and the separation agreement

between the noncustodial father and mother

provided that the noncustodial father

would be entitled to the exemptions.

Most of the relevant facts have been

stipulated and are found accordingly.

Petitioner was a resident of Marina

Del Ray, California, at the time the

15 (a)

;

petition was filed in this case.

During the tax year 1978 petitioner

and Judy Schneier were married and had

custody of two children of Judy Schneier

from her former marriage with Mr.Stackel.

The separation agreement entered into

between Mr.Stackel and Mrs.Schneier in-

cident to their divorce provided that Mr.

Stackel would be entitled to dependency

exemptions for the two children provided

he made the $400 monthly support payments

required by the agreement. During 1978,

Mr.Stackel complied with the terms of the

separation agreement concerning support

and he made payments amounting to $5,600

for the support of the two children.

The amount of support provided by the

petitioner for the two children during

1978 was more than one-half of their

total support for the year.

Petitioner was not a party to the

divorce or the separation agreement bet-

ween Mr.Stackel and Mrs.Schneier, and he

16(a)

did not know of the terms of their divorce

or separation agreement prior to May 1981.

On their joint Federal income tax re-

turn for the year 1978, petitioner and

Mrs. Schneier claimed dependency exempt-

ions for the two children. Mr.Stackel

claimed exemptions on his 1978 returm

for the two children as well. Respondent

determined that Mr.Stackel is,and peti-

tioner and Judy Schneier are not, enti-

tle to the exemptions mee. We agree

with respondent.

Petitioner relies upon the provisions

of section 15l(e) and section 152(a) (2)

in support of his claim to entitlement

for the exemptions. These sections permit

an exemption for a stepchild of the tax-

payer if the taxpayer contributes over one

half of the stepchild's support. Since it

Although the notice of deficiency in

this case,because it relates to the joint

return filed by petitioner and Judy

Schneier,was issued to the two of then,

only petitioner filed a petition in

response to the notice.

17(a)

has been stipulated that over one-half of

the support for the two children involved

here was received from petitioner, and

since there is no dispute that the chil-

dren were his stepchildren during the

taxable year 1978,petitioner contends

that he meets all of the requirements

of the statutes. However, respondent

relies upon section 152(e) for the

position that for purposes of section

152(a), Mr. Stackel is to be treated as

if he contributed over one-half of the

children's support such that he,and not

petitioner, is entitled to the exemptions.

Section 152(e)(1) provides that if a

"child" receives over one-half of his

support from his divorced or legally

separated "parents" and the child is in

the custody of one or more of his parents

for more than one-half of the year,then,

unless section 152(e)(2) applies, the

child shall be treated as having received

18 (a)

over one-half of his support from the

parent having custody the greater portion

of the year. Section 152(e)(2) provides

that the child referred to in section

152(e)(1) shall be treated as having re-

ceived over one-half of his support from

the parent not having custody if a di-

vorce decree or a written agreement pro-

vides that the noncustodial parent shall

be entitled to the exemption,and that

parent provides at least $600 support for

the child during the year.

Respondent argues that because the

separation agreement between Mr.Stackel

and Mrs.Schneier provided that Mr.Stackel

was to have the benefit of the dependency

exemptions for the two children,and Mr.

Stackel paid more than $600 support for

them,he, and not petitioner,is entitled

to the exemptions.

A threshold requirement for the ap-

plicability of the special rules provided

19(a)

by section 152(e) in the case of divorced

parents is that the parents must provide

over one-half of the child's support.

Thus,if more than one-half of the support

is provided by a third party,section 152

(e) has no applicability and the general

rules of section 151 and section 152 de-

termine whether a taxpayer is entitled to

the exemption. Hopkins v. Commissioner,

55 T.C. 538, 540-541 (1970) ;section 1.152-

4(a), Income Tax Regs. Petitioner contends

that we should consider the exemptions for

his two stepsons as having been claimed

by him as a "third party" not precluded

under section 152(e)(2) from doing so by

the separation agreement involving Mr.

Stackel and Mrs. Schneier.

However,in the first instance, petition-

er overlooks the fact that it is not he,

as an individual taxpaying unit separate

and distinct from Mrs.Schnier, who claimed

the exemptions on the returm in question.

20 (a)

Rather,the exemptions were claimed on a

joint return filed by petitioner and Mrs.

Scnneier. It has long been held that in

come and deductions reported on a joint

returm are to be treated as having been

reported by husband and wife together

filing as a single taxable unit. Taft v.

Helvering, 311 U.S.195 (1940); United

States v. Allen, 551 F. 2d 208 (8th Cir.

1977).

Thus, petitioner cannot so convenient-

ly frame the dependency exemption question

in terms of his relationship to the chil-

dren and the amount of support that he

provided for them. The exemptions in

issue were claimed by a single taxpaying

unit of which Mrs.Schneier was as much a

part as petitioner. Viewing the situation

in this light, we conclude that the pro=

visions of section 152(e) prohibit peti-

tioner and Mrs.Schneier from claiming the

exemptions on the joint return they filed.

21(a)

Admittedly,section 152(e) is not clear

on its face as to its applicability to the

precise situation involved in this case.

The "special rule" of section 152(e) (2)

which allows the exemption to the non-

custodial spouse applies to the "child"

of "parents" described in section 152(e)

(1). Section 152(e) (1) avclics if a "child"

(as defined in section 15l(e)(3)) receives

over one-half of his support during the

year "from his parents who are divorced

or legally separated***.'"' On the one

hand,a stepfather would appear to be

included within the scope of section 152

(e)(1),since that section refers to sec-

tion 15l1(e)(3) for the definition of the

term "child," and section 151l(e)(3) de-

fines a "child" to include a stepson or

stepdaughter of a taxpayer. However, the

'bhild" referred to in section 152(e) (1)

is further described in that section as

an individual receiving over one-half of

22 (a)

his support from his parents "who are

legally separated or divorced." Arguably,

the description of persons included as

"parents" would exclude a stepfather who

is not a party to the divorce proceedings

and who provided over one-half of the

support for the child.

~-*

However, we think section 152(e) (1)

and (2) should be interpreted to pre-

clude a natural parent and her spouse

filing a joint return from claiming the

exemption for a child where the non-

custodial parent is otherwise entitled

to the exemption under section 152(e) (2).

In this situation, the single taxable unit

Respondent reached the same conclusion

in Rev. Rul. 78-91,1978-1 C.B. 36. Ge-

nerally, revenue rulings are not entitled

to the weight of Treasury Regulations,and /

will be set aside if they amount to an

unreasonable nrg ge prong of the statute

involved. Estate of Lan . Commissioner,

64 T.C. 40 cf in part

and reversed in part, 613 F. 2d 770 (9th

Cir. 1980).

23 (a)

comprised of the natural parent and her

spouse filing the joint return should be

considered "parents" bound by the pro-

visions of section 152(e).

In reaching this conclusion,we are

particularly mindful of the legislative

purpose behind the enactment of the spe-

cial provisions of section 152(e). In

this respect,before the section was enact-

ed,considerable controversy and uncertain-

ty was generated over the issues as to

the total support provided by each parent.

To alleviate that situation,Congress pro-

vided,with the enactment of section 152(e),

that the parents could decide and agree

at the time of their divorce who was to

have the dependency exemptions, and that

their straightforward agreement on the

matter would control for tax purposes.

We have reached no conclusion as to

the result in this case if petitioner

had filed a separate return.

24 (a)

See Colton v. Commissioner, 56 T.C. 471,

473-474 (1971); Sheeley v. Commissioner,

59 T.C.531,534 (1973). In light of this

legislative purpose,we concluded in Colton

that the noncustodial parent was entitled

to dependency exemptions and his ex-wife

was not even though the noncustodial

parent's support contribution could be

viewed as having been derived from com-

munity earnings of him and his new spouse

such that his "individual" contribution,

if community property rules were appli-

cable in interpreting section 152(e),

would be less than the $600 minimum re-

quired by the statute. We stated in Colton

v. Commissioner, supra at 475:

KKK (The application of community pro-

perty laws] would introduce a whole

new set of complexities - the neces-

sity for distinguishing community

from separate property - and would

thus frustrate the congressional

quest for simplicity and certainty.

An interpretation so completely at

variance with a declared legislative

purpose should not be adopted unless

required by the plain terms of the

25 (a)

statute. (citations omitted].

Likewise,the interpretation of thes

statute sought by petitioner in this case

would clearly frustrate congressional in-

tent. It would involve the necessity for

tracing the relative contribution to the

support of a child made by the custodial

parent and the spouse of that parent to

determine whether the noncustodial parent

otherwise entitled to the exemption by

reason of his agreement with the custodial

parent is so entitled. While Congress did

indicate that section 152(e) was not to

apply where a "third party" contributes

6 :

For example,although respondent stip-

ulated in this case that petitioner pro-

vided over one-half of the children's

Support,it appears that the support pro-

vided came from community earnings of

petitioner and Mrs.Schneier, While peti-

tioner relies upon Colton v.Commissioner,

56 T.C.472,473-474(19/71) ,for the notion

that community property rules should be

disregarded in determining his support

contribution,if petitioner,unlike the

petitioner in Colton,were to be treated

as true "third party" having no obligation

to support the children,his argument that

one-half of the support derived from "his"

earnings should not be attributed to Mrs.

Schneier is of doubtful merit.

26 (a)

over one-half of the child's support (see

H. Rept. No. 102, 90th Cong., lst Sess.1

(1967), 1967-2 C.B. 590-594; S. Rept. No.

488, to accompany H.R. 6056 (Pub. L.90-78),

90th Cong., lst Sess.(1967), reprinted in

1967 U.S. Code Cong. & Adm.News, 1527,

1529), there is no indication that Cong-

ress intended a "third party" to include

a stepparent under the instant factual

situation. Moreover,we think it was clear-

ly foreseeable by Congress that divorced

Spouses reaching agreement as to the mat-

ter of exemptions would remarry,and it is

unreasonable to conclude that Congress

intended that the certainty which it

otherwise sought to provide by the stat-

ute would be completely upset by -

marriage of the custodial spouse. See

See Reynolds v. Commissioner, T.C.

Memo. 1980-6; O'Brien v. Commissioner,

T.C. Memo. 1975-329.

27 (a)

footnote 5, supra.

Finally, we reject petitioner's vari-

ous constitutional arguments that our

interpretation of section 152(e),which

denies petitioner the benefit of exemp-

tions for the two children because of an

agreement to which petitioner was not a

party,is invalid. Anetn pactertonee con-

veniently overlooks the fact that he

elected to file a joint retum with his

spouse,and by doing so presumably obtain-

ed the benefits of joint retum rates. He

now seeks to cast the exemption question

in terms of whether "he",individually,

has been deprived of entitlement to the

exemptions which were in fact claimed on

a joint returm. In any event,deductions,

including dependency exemptions,are mat-

ters of legislative grace which Congress

has been given great leeway in condition-

ing, limiting,and denying. Labay v. Com-

missioner, 55 T.C. 6, 14 (1970), affd.

28 (a)

450 F.2d 280 (Sth Cir.1971). Particularly

in view of the congressional purpose to

inject certainty into an area of law that

was fraught with controversy,we do not

believe our holding that a spouse who

files a joint return with a custodial

spouse is bound by the provisions of

section 152(e) results in an arbitrary

and capricious classification.

Decision will be entered

for the respondent.

29 (a)

UNITED STATES TAX COURT

WASHINGTON, D. C. 20217

MAX SCHNEIER, )

Petitioner )

Vv. ) Docket No.

) 8277-82

COMMISSIONER OF )

INTERNAL REVENUE,

Respondent.

DECISION

Pursuant to the determination of the

Court, as set forth in its Memorandum

Findings of Fact and Opinion T.C. Memo.

1983-390 filed on July 5, 1983, it is

ORDERED AND DECIDED: That there is

a Federal income tax deficiency due from

petitioner for the year 1978 in the

amount of $523.00.

(signed) Howard A.Dawson,Jr.

Chief Judge

Entered: JUL 6 1983

Form 50

Rev. Apr. 1970

30(a)

——————————= lll

UNITED STATES TAX COURT

MAX SCHNEIER, )

Petitioner,

Vv. Docket No.8277-82

COMMISSIONER OF

INTERNAL REVENUE,

Respondent.

STIPULATION OF FACTS

In accordance with Tax Court Rule 91(e),

the below-signed parties agree to this

stipulation of facts pursuant to the gen-

eral terms of this preable,unless specif-

ically expressed otherwise in this stip-

ulation. All stipulated facts shall be

considered authentic. All copies shall be

treated as if originals. Any relevancy

objection may be made with respect to all

Or any part of this stipulation at the

time of submission,but all other evident-

iary objections are waived unless specif-

cally expressed within this stipulation.

1. Petitioner Max Schneier's legal

31(a)

residence is now,and was at tl'2 date of

the filing of the petition herein,4150

Via Dolce, # 224, Marinal del Rey,

California 90291.

2. Attached hereto as Joint Exhibit

1-A is a copy of the federal income tax

return of the petitioner for the taxable

year 1978.

3. Attached hereto as Joint Exhibit

2-B is a complete copy of the statutory

notice of deficiency upon which notice

this case is based.

4. The sole issue in this case is

whether petitioner is entitled to claim

dependency exemptions for his two step-

children for whom he contributed over 50%

of their support,during 1978,in light of

the fact that petitioner's wife's former

husband claimed the exemptions pursuant

to their written separation agreement.

5. Max Schneier and Judy (Stackel)

Schneier were legally married during

32 (a)

the year of 1978.

6. Dean Stackel aged 14,and Gregory

Stackel, aged 11, were the natural chil-

dren of Judy (Stackel) Stneter.

7. Judy Schneier and Dean and Gregory

Stackel resided with Max Schneier for al-

most the entire year of 1978 at 1436 Ca-

pri Drive, Pacific Palisades,CA 90272;

and that Dean and Gregory were members

of my household as defined in Section

152(a) (9) in that year.

8. The amount of support provided by

Max Schneier for Dean and Gregory Stackel

during 1978 was more than half of their

total support for that year.

9. Attached hereto as Joint Exhibit

3-C is a copy of the pertinent portions

of the separation agreement entered into

in 1972 by Judy Schneier and her former

husband, Stephen Stackel.

10. Stephen Stackel complied with the

terms of the agreement by paying child

33 (a)

support throughout 1978. The total amount

of support provided by Stephen Stackel

for his sons Dean & Gregory Stackel during

1978 was approximately between $5,000.00

to $6,000.00.

11. Stepehn Stackel claimed Dean and

Gregory Stackel as dependents on his

1978 tax return.

12. Max Schneier is not a party to the

divorce or separation agreement between

Judy (Stackel) Schneier and Stephen

Stackel. Max Schneier did not know per-

sonally,or know of Stephen Stackel or

Judy {tackel prior to 1976 and was not

aware of the terms of the divorce or

separation agreement prior to the letter

he received from the I.R.S.on May 14,1981.

KENNETH W.GIDEON

Chief Counsel

Intermal Revenue Service

34 (a)

eee Rew Ge at

ee O.Greaves

J H 0.G

District Counsel

300 No.Los Angeles St,

P.O. Box 2031,Main P.O.

Los Angeles, CA 90053

Tel. No. (213) 688-6311

Date: April 4, 1983

(signed) Max Schneier

Max Schneier

Petitioner

Date: April 4, 1983

35 (a)

APPENDIX B

FEDERAL STATUTES INVOLVED

(Relevant Parts)

26 USCA 151

Part V—Deductions For Personal Exemptions

Sec,

I51. Allowance of deductions for personal

exemptions

152. Dependent defined.

§ 151. Allowance of deductions for

personal exemptions

(a) Allowance of deductions.—In the

case of an individual,the exemptions pro-

vided by this section shall be allowed as

deductions in computing taxable income.

e) Additional exemption for dependents.—

(1) In general.—An exemption of $1,000

for each dependent (as defined in section

152)—

(A) whose gross income for the calendar

year in which the taxable year of the

taxpayer begins is less than $1,000,or

(B) who is a child of the taxpayer and

who (i) has not attained the age of 19

at the close of the calendar year in

which the taxable year of the taxpayer

begins,or (ii) is a student.

(3) Child defined.—For purposes of

paragraph (1)(B),the term "child" means

an individual who (within the meaning of

section 152) is a son, stepson, daughter,

or stepdaughter of the taxpayer.

1(b)

26 USCA 152

§ 152. Dependent defined

(a) General definition. —For purposes of

this subtitle,the term "dependent"means

any of the following individuals over

half of whose support,for the calendar

year in which the taxable year of the tax-

payer begins,was received from the tax-

payer (or is treated under subsection (c)

or (e) as received from the taxpayer):

(1) A son or daughter of the taxpayer,

or a descendant of either,

(2) A stepson or stepdaughter of the

taxpayer,

(3) A brother,sister,stepbrother, or

stepsister of the taxpayer,

(4) The father or mother of the tax-

payer,or an ancestor of either,

(5) A stepfather or stepmother of

the taxpayer,

(6) A son or daughter of a brother

or sister of the taxpayer,

(7) A brother or sister of the

father or mother of the taxpayer,

(8) A son-in-law,daughter-in-law,

father-in-law ,mother-in-law,brother-in-

law,or sister-in-law of the taxpayer,or

(9) An individual (other than an

individual who at any time during the

taxable year was the spouse,determined

without regard to section 143,of the

taxpayer) who,for the taxable year of

the taxpayer,has as his principal place

of abode the home of the taxpayer and

is a member of the taxpayer's household.

(b) Rules relating to general definition. —

For purposes of this section—

(3) The term "dependent" does not

include any individual who is not a

citizen or national of the United States.

(5) An individual is not a menwer of

the taxpayer's household if at any time

during the taxable year of the taxpayer

2(b)

26 USCA 152 (cont.)

the relationship between such indivi-

dual and the taxpayer is in violation

of local law

(e) Support test in case of child of

divorced parents,etc.—

(1) General rule.—If—

(A) a child (as defined in sec-

tion 15l1(e)(3)) receives over half

of his support during the calendar

year from his parents who are di-

vorced or legally separated under

a written separation agreement,and

(B) such child is in the custody

of one or both of his parents for

more than one-half of the calendar

year,such child shall be treated,

for the purposes of subsection (a),

as receiving over half of his support

during the calendar year from the

parent having custody for a greater

portion of the calendar year unless

he is treated,under the provisions of

paragraph (2)as having received over

half of his support for such year

from the other parent (referred to in

this subsection as the parent not

having custody).

(2) Special rule.—The child of parents

described in ee (1) shall be treated

as having received over half of his support

during the calendar year from the parent not

having custody if—

(A)(i) the decree of divorce or of

separate maintenance,or a written agree-

ment between the parents applicable to

the taxable year beginning in such

calendar year,provides that the parent

not having custody shall be entitled

to any deduction allowable under sec-

tion 151 for such child, and

3(b)

26 USC 152 (cont.)

(11) such parent not having custody

provides at least $600 for the support

of such child during the calendar year,

(5) Regulations.—The Secretary shall

prescribe such regulations as may be

necessary to carry out the purposes of

this subsection.

26 USCA 6013

26 8 6013 Joint returns of income tax by

husband and wife

(a) Joint returns.—A husband and wife

may make a single return jointly of

income taxes under subtitle A, even

though one of the spouses has neither

gross income nor deductions,except as

provided below:

(d) Special rules.--For purposes of this

section—

(3) if a joint return is made,the

tax shall be computed on the aggregate in-

come and the liability with respect to

the tax shall be joint and several.

(e) (2) Special rules.—

(A) the determination of the

spouse to who items of gross in-

come (other than gross income from

property) are attributable shall

be made without regard to community

property laws

gg agg eg, ng, iy i, lg,

i i i es, a

ig ag i ee ee

4(b)

TAX REFORM ACT OF 1984

PUBLIC LAW 98-369

(effective January 1,1985)

Sec. 423. DEPENDENCY EXEMPTION IN THE

CASE OF CHILD OF DIVORCED

PARENTS, ETC.

(a) GENERAL RULE.—Subsection (e) of

section 152 (relating to support test in

case of child of divorced parents,etc.)

is amended to read as follows:

"(c) SUPPORT TEST IN CASE OF CHILD OF

DIVORCED PARENTS, ETC.— -

"(1) CUSTODIAL PARENT GETS EXEMPTION. —

Except as otherwise provided in this

subsection,if—

"(A) a child (as defined in section 15l

(e)(3)receives over half of his support

during the calendar year from his par-

ents=—

"(i) who are divorced or legally

separated under a decree of divorce

Or separate maintenance,

"(ii) who are separated under a

written separation agreement, or

"(iii) who live apart at all times

during the last 6 months of the cal-

endar year, and

"(B) such child is in the custody of

one or both of his parents for more than

one-half of the calendar year,such child

shall be treated,for purposes of sub-

section (a),as receiving over half of

his support during the calendar year from

the parent having custody for a greater

portion of the calendar year (hereinafter

in this subsection referred to as the

‘custodial parent').

(2) EXCEPTION WHERE CUSTODIAL PARENT

RELEASES CLAIM TO EXEMPTION FOR THE YEAR. —

A child of parents described in paragraph

(1) shall be treated as having received

5 (b)

TAX REFORM ACT OF 1984 (cont. )

over half of his support during a calen-

dar year from the noncustodial parent if—

"(A) the custodial parent signs a

written declaration (in such manner

and form as the Secretary may by reg-

ulations prescribe) that such custo-

dial parent will not claim such child

as a dependent for any taxable year

beginning in such calendar year, and

"(B) the noncustodial parent attach-

es such written declaration to the

noncustodial parent's return for the

taxable year beginning during such

calendar year.

For purposes of this subsection,the term

'‘noncustodial parent' means the parent w

who is not the custodial parent.

"(3) EXCEPTION FOR MULTIPLE SUPPORT

AGREEMENT.—This subsection shall not

apply in any case where over half of the

support of the child is treated as having

been received rom a taxpayer under the

provisions of subsection (c).

"(4) EXCEPTION FOR CERTAIN PRE-1985

INSTRUMENTS. —

"(A) IN GENERAL.—A child of parents

described in paragraph (1) shall be treat-

ed as having received over half his sup-

port during a calendar year from the non-

custodial parent if—

| "(i) a qualified pre-1985 instrument

between the parents applicable to the

taxable year beginning in such calendar

year provides that the noncustodial

parent shall be entitled to any deduct-

ion allowable under section 151 for

such child, and

"ii) the noncustodial parent provides

at least $600 for the support of such

child during such calendar year.

For purposes of this subparagraph,amounts

6 (b)

TAX REFORM ACT OF 1984 (cont.)

expended for the support of a child or

children shall be treated as received

from the noncustodial parent to the ex-

tent that such parent provided amounts

for such support.

"(B) QUALIFIED PRE-1985 INSTRUMENT. —

For purposes of this paragraph, the term

"qualified pre-1985 instrument means any

decree of divorce or separate maintenance

or written agreement—

"(i)which is executed before Janu-

ary 1,1985. r

"(ii)which on such date contains

the provision described in subpara-

graph (A) (i),and

"(iii)which is not modified on or

after such date in a modification

which expressly provides that this

paragraph shall not apply to such

decree or agreement.

"(5) SPECIAL RULE FOR SUPPORT RECEIVED

FROM NEW SPOUSE OF PARENT.—For purposes

of this subsection,in the case of the re-

marriage of a parent, support of a child

received from the parent's spouse shall

be treated as received from the parent.

"(6) CROSS REFERENCE. —

"For provision treating child as

dependent of both parents for purposes

of medical expense deduction,see section

213 (dk4) ."

tag, Phi gy, eg, gy, “ig, Mg, ey he, Mg,

gg, ig gy i, gy yy, ly ey, ly, yy

ag a a a a ey, Tg, ng iy, ey,

7 (b)

TREASURY REGULATIONS INVOLVED

(Relevant Parts)

26 CFR 1.151

DEDUCTIONS FOR PERSONAL EXEMPTIONS

§1.151-1 Deductions for personal exemp-

tions.

(a) In general. (1) In computing tax-

able income,an individual is allowed a

deduction for the exemptions specified

in section 151. Such exemptions are:

(iv) the

exemptions for dependents or the taxpayer.

§1.151-2 Additional exemptions for de-

pendents.

(a) Section 15l(e) allows to a tax-

payer an exemption for each dependent

(as defined in section 152) whose gross

income (as defined in section 61) for the

calendar year in which the taxable year

of the taxpayer begins is less than the

amount provided in section 151l(e) (1) (A)

applicable to the taxable year of the

taxpayer,or who is a child of the tax-

payer.

(b) The only exemption allowec. for a

dependent of the taxpayer is tha pro-

vided by section l5il(e).

§1.151-3 Definitions

(a) Child. For purposes of sections

151(e),152 and the regulations there-

under, the term "child" means a son, step-

son, daughter, stepdaughter.

8 (b)

26 CFR 1.152-1 General definition of a

dependent.

a)(1)For purposes of the income taxes im-

posed on individuals by chapter 1 of the

Code,the term "dependent" means any indivi-

dual described in —— (1) through(10)

of section 152(a)over half of whose support,

for the calendar year in which the taxable

year of the taxpayer begins,was received

from the taxpayer.

2) 4) For purposes of determining whether

Or not an individual received,for a given

calendar year,over half of his support from

the taxpayer,there shall be taken into ac-

count the amount of support received from

the taxpayer as compared to the entire am-

ount of support which the individual re-

ceived from all sources,including support

which the individual himself supplied...

Section 152(a)(9)applies to any indi-

vidual other than an individual who at any

time during the taxable year was the spouse,

determined without regard to section 153,of

the taxpayer)who lives with the taxpayer

and is a member of the taxpayer's household

during the entire taxable year of the tax-

payer.An individual is not a member of the

taxpayer's household if at any time during

the taxable year of the taxpayer the rela-

tionship between such individual and the

taxpayer is in violation of local law.It is

not necessary under section 152(a)(9) that

the dependent be related to the taxpayer...

It is necessary,however,that the taxpayer

both maintain and occupy the household...

c) In the case of a child of the taxpayer

w is under 19 or who is a student,the tax-

payer a claim the dependency exemption fa

such child provided he has furnished more

than onechals of the support of such child

for the calendar year in which the taxable

year of the taxpayer begins,even though the

income of the child for such calendar year

may be equal to or in excess of the amount

9(b)

determined pursuant to §1.151-2 applicable

to such calendar year.In such a case there

may be two exemptions claimed for the child:

One on the parent's (or stepparent's) re-

turn, and one on the child's return.

26 CFR 1.152-2

(d) In the case of a joint return it is not

necessary that the prescribed relationship

exist between the person claimed as a de-

pendent and the spouse who furnishes the

support; it is sufficient if the prescribed

relationship exists with respect to either

spouse.

§1.152-4 Support test in case of child of

divorced or separated parents.

(a) Applicability.For taxable years begin-

ing after December 31,1966,the provisions

ofsection 152(e)and this section relate to

a determination of which of separated par-

ents (that is parents who are divorcéd or

legally separated under a decree of di-

vorce or separate maintenance,or separated

under a written separation agreement)is to

be treated for purposes of section 152(a)

and §1.152-1 as having provided more than

half of the support of a child,as defined

in section 15l(e)and this section to apply

either parent or both parents combined must

provide more than one-half of the child's

total support,within the meaning of

$1.152-1(a)(2)(i) during the calendar year

in which the taxable year of the parent who

is claiming the child as a dependent begins;

and such child must be in the custody of

one or both of his parents for more than

one-half of the calendar year. Thus,section

152(e) and this section do not apply if a

erson other than the parents provides one-

Fatt Or more for the support of such child

during the calendar year or has custody of

the child for cae? or more of the cal-

endar year...(Emphasis added.)

10(b)

§1.152-4 (d) Exceptions—(1) In general.

Notwithstanding paragraph (c) of this

section, a child shall be treated as re-

ae over half of his support during

the calendar year from the parent who is

not the custodial parent (hereinafter

referred to as the "noncustodial parent")

if the conditions of subparagraph (2)

...-Of this paragraph are met.

(2) Decree or agreement. A non-

custodial parent who provides at least

$600 for the support of a child during

the calendar year shall be.treated as

having provided more than half of the

support of the child if the decree of

divorce or of separate maintenance or a

written agreement between the parents

applicable to the taxable year of the

noncustodial parent beginning in such

calendar year,provides that the noncusto-

dial parent shall be entitled to any de-

duction allowable under section 151 as an

exemption for the dependent child...

§1.6013-1 Joint returns.

(a) In general (1) A husband and wife

may elect to make a joint returm under

section 6013(a) even though one of the

spouses has no gross income or deductions.

For rules for determining whether indivi-

duals occupy the status of husband and

wife for purposes of filing a joint re-

turm,see paragraph (a) of §1.6013-4.

§1.6013-4 Applicable rules.

(a) Status as husband and wife. For

the purpose of filing a joint returm un-

der section 6013, the status as husband

and wife of two individuals having tax-

able years beginning on the same day shall

be determined:

11(b)

§1.6013-4(cont. )

(1) If the taxable year of each indi-

vidual is the same,as of the close of

such year; and

(b) Computation of income,deductions,

and tax. If a joint return is made, the

gross income and adjusted gross income

of husband and wife on the joint returm

are computed in an aggregate amount and

the deductions allowed and the taxable

income are likewise computed on an aggre-

gate basis...Although there are two tax-

payers on a joint return,there is only

one taxable income. The tax on the joint

return shall be computed on the aggregate

income and the liability with respect to

the tax shall be joint and several.

§1.6013-5 Spouse relieved of liability in

certain cases

termination of the spouse to whom items

of gross income (other than gross income

from property) are attributable shall be

made without regard to any applicable

community property laws.

///

lg, lg, a ng i a i se

aa, ay a ey a i a i i i

12 (b)

REVENUE RULING INVOLVED

(RELEVANT PART)

Revenue Ruling 78-91 (1 CB. 36 (1978)

Children of divorced parents; support

provided by custodial parent's new spouse.

Support provided for the children of di-

vorced parents by the custodial parent's

new spouse will be attributed to the cus-

todial parent in determining whether the

divorced parents contributed over half

the children's support during the calen-

dar year for purposes of section 152(e)

of the Code. If the divorced parents to-

gether provided over half the support,the

noncustodial parent will be entitled to

the dependency exemptions if a decree of

divorce or written agreement so provides

and the noncustodial parent contributed

at least $600 for the support of each

child for the year. Rev.Rul.73-175 am-

plied.

///

a i a i i eg a i a i

Tg al ig a i, gg ig, Rg i i i ly i i ya, ne

Sg a a ng ng a i ig ON lig Ng tng, ey, la

13 (b)

LEGISLATIVE HISTORY INVOLVED

(RELEVANT PARTS)

SENATE REPORT NO. 488 (1967)

INTERNAL REVENUE—EXEMPTIONS

INTERNAL REVENUE@TAX EXEMPTIONS—

DIVORCED PARENTS

P.L. 90-78,see page 210

House Report (Ways and Means Committee)

No. 102, Mar. 8, 1967 [To accompany H.R.

6056]

Senate Report (Finance Committee) No.488,

Aug.3, 1967 [To accompany H.R. 6056]

Cong.Record Vo.113 (1967)

III. GENERAL EXPLANATION OF THE BILL

The bill provides specific rules for

determining which of separated parents is

to be entitled to the deduction for per-

sonal exemption with respect to their

children. These new rules apply where the

parents are divorced or legally separated

under a written separation agreement. (In

this respect,your committee made a tech-

nical amendment to the bill to make it

clear that the new rules are to be appli-

cable in all situations involving parents

who are separated under a written separa-

tion agreement. Under the language used

tc accomplish this result in the bill as

passed by the House,it seems likely that

some of these situations would not have

been covered.) The new rules apply with

respect to a child only if the parents

together furnish more than one-half of

his support for a year,and only if the

child is in the custody of his parents

14 (b)

Senate Report No. 488 - III. (cont. )

for more than one half of the year.

Thus, the new rules do not appl where a

third erson contributes TET or more

of the support of the child or where the

child is a the custody of a person other

than his parents for one-half of the year

or more. vEnphasis added. )

HOUSE REPORT NO, 102 (1967)

(H.R. 6056]*

INCOME TAX SUPPORT TEST IN CASE OF CHIL-

DREN OF DIVORCED PARENTS

(House of Representatives Report No. 102,

Ninetieth Congress, First Session

(March 8, 1967]

(RELEVANT PART)

IIl. GENERAL EXPLANATION OF THE BILL

The bill provides specific rules for

determining which of separated parents

is to be entitled to the deduction for

personal exemption with respect to their

children. These new rules apply where the

parents are divorced or legally separated

under a decree of divorce or of separate

maintenance or are separated under a writ-

ten separation agreement. They apply with

respect to a child only if the parents to~

gether furnish more than one-half of his

support for a year,and only if the child

is in the custody of his parents for more

than one-half of the year. Thus the new

rules do not apply where a third person

contributes one-ha or more ot the Sup-

Ort of the child or where the child is

in the custod of a person other than his

parents for one-halt of the year or more.

(Emphasis added. )

15 (b)

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.