Internal Revenue Service
Revenue Ruling

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 Rev. Rul. 64-41

1964-1 C.B. 84

Sec. 151

Sec. 152

IRS Headnote

A dependency exemption may be taken by a taxpayer for his foster parent who owns the house in which he and the taxpayer life if the statutory requirements contained in sections 151(e) and 152(a)(9) of the Internal Revenue Code of 1954 are met.

Full Text

Rev. Rul. 64-41

Advice has been requested whether a taxpayer may take a dependency exemption for his foster parent who owns the house in which he and the taxpayer live. The foster parent has little taxable income and it is necessary for the taxpayer to pay the expenses of operating the house and maintaining the household.

Section 151(e) of the Internal Revenue Code of 1954 provides, in general, that a taxpayer may take an exemption of $600 for each dependent, as defined in section 152 of the Code, whose gross income for the calendar year in which the taxable year of the taxpayer begins is (with certain exceptions relating to children of the taxpayer), less than $600.

The term `dependent' as defined in section 152(a) of the Code includes certain individuals over half of whose support for the calendar year was received from the taxpayer. A foster parent does not come within any of the degrees of relationship specified in paragraphs (1) through (8), or paragraph (10) of section 152(a) of the Code. Therefore, in order for a foster parent to qualify as a dependent, he must do so under paragraph (9) which reads as follows:

(9) An individual * * * 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 * * *.

In connection with paragraph (9) of section 152(a) of the Code, section 1.152-1(b) of the Income Tax Regulations states, `It is necessary * * * that the taxpayer both maintain and occupy the household.'

The test for determining whether an individual maintains a household for the purpose of section 152(a)(9) of the Code is the same as that used to determine whether an individual maintains a household for the purpose of the special tax treatment afforded a head of a household under section 1(b)(1) of the Code. Section 1(b)(2) of the Code provides, in part, that an individual shall be considered as maintaining a household only if over half of the cost of maintaining the household during the taxable year is furnished by such individual.

Accordingly, it is held that a taxpayer may take a dependency exemption for a foster parent if the taxpayer pays more than half of the cost of maintaining the household in which the two reside for the entire taxable year and the other statutory requirements for taking a dependency exemption are met. In determining whether the taxpayer has paid over half of the foster parent's support and more than half of the cost of maintaining the household, the foster parent is considered as furnishing for his own support and toward the maintenance of the household the rental value of the house in which they both live, minus any amount paid by the taxpayer for taxes, insurance, repairs, etc., on the house.