units are linked together to form a "quarterly meeting," and the quarterly meetings in a region are organized into "yearly meetings." This denomination has no rituals, rubrics or programed religious service, its central act of worship consisting chiefly in communal prayer and meditation with any member being free to speak to those assembled if he is moved to do so. The customary role of the minister, therefore, does not exist insofar as the worship service is concerned. Some of the larger monthly meetings, however, do employ a full time "secretary" who is an executive performing functions similar to those performed by the minister in other denominations. For example, he assists in the operation of the Sunday School, visits the sick, advises the meeting's various committees, represents the meeting on the local council of churches, prepares a newsletter for the members of the meeting and speaks at interchurch gatherings explaining the beliefs of his particular denomination. The employment of the secretary is approved at a business session of the meeting and is recorded in its minutes. There is no ordination or other formal ceremony in connection with his employment and the secretary's tenure of office is on a year-to-year basis terminable at the will of either party. At the level of the yearly meeting, there are offices providing a variety of services to the local monthly meetings. These offices publish educational materials, coordinate the operations of church schools and promote a variety of programs in the advancement of world peace, social service, and race relations. Administrators are employed at this level to perform functions similar to those carried out by administrators of other religious organizations and their integral agencies. The denomination historically does not employ ordained ministers to perform these duties. However, certain local meetings do employ professional ministers for this purpose. These individuals, who have fulfilled all scholastic prerequisites for becoming professional ministers, are not officially ordained by any superior but are recorded as ministers in the minutes of the competent meeting. This recording is regarded by the denomination as being the equivalent of the ordination of a minister by other denominations and confers upon the individuals so recorded the right to exercise ministerial duties, such as performing marriages, if required to do so. Section 107 of the Code provides that, in the case of a minister of the gospel, gross income does not include the rental value of a home furnished to him as part of his compensation, or the rental allowance paid to him as part of his compensation to the extent used by him to rent or provide a home. Section 1.107-1 (a) of the Income Tax Regulations provides, in part, that in order to qualify for the exclusion, the home or rental allowance must be provided as remuneration for services which are ordinarily the duties of a minister of the gospel and that, in general, the rules provided in section 1.1402(c)-5 of the regulations will be applicable to such determination. Section 1.1402 (c)-5(b) (2) (i) of the regulations states that whether services performed by a minister constitute the conduct of religious worship or the ministration of sacerdotal functions depends on the tenets and practices of the particular religious body constituting his church or church denomination. The term "minister of the gospel" as used in section 107 of the Code means an individual who is duly ordained, commissioned, or licensed to the pastoral ministry by action of a religious body constituting a church or church denomination and invested with the authority to conduct religious worship, to perform sacerdotal functions, and to administer ordinances or sacraments in accordance with the prescribed tenets and practices of such church or church denomination. In cases where a church or church denomination ordains some ministers of the gospel and licenses or commissions other ministers, in every respect the licensing or commissioning of an individual as a minister of the gospel must establish a status that is equivalent of ordination and is so recognized by the church. That is, the individual, upon being licensed or commissioned, must be invested with the status and authority of an ordained minister, fully qualified to exercise all of the ecclesiastical duties of such a minister in his denomination. See Rev. Rul. 65-124, C.B. 1965-1, 60. See also Revenue Ruling 59-270, C.B. 1959-2, 44, which holds that neither a "minister of music" nor a "minister of education" is entitled to the exclusion provided in section 107 of the Code. In each case, neither was an ordained minister of the gospel, although both performed services relating to the office and function of a minister of the gospel. That holding may be contrasted with the position taken in Revenue Ruling 58-221, C.B. 1958-1, 53, where an exclusion under section 107 of the Code was permitted to an individual who was employed at a Jewish Community Center and Temple and whose duties constituted the conduct of religious worship or the ministration of sacerdotal functions according to the tenets and practices of the Jewish faith. The individual concerned, however, had been ordained by a theological seminary. Many of the individuals holding executive positions in this denomination have been recorded as secretaries by the various meetings of that denomination for the period of their employment only, to serve primarily in a secular capacity. On the other hand, some of the individuals have been recorded as ministers by a meeting and invested with the authority to exercise ministerial duties. This latter recording is regarded by the denomination as the equivalent of ordination by other Protestant denominations. Accordingly, individuals holding executive positions in a religious denomination which has no formal ordination, commissioning, or licensing procedure, do not qualify as ministers of the gospel for purposes of section 107 of the Code even though they are employed to carry out functions normally performed by ministers of the gospel in other denominations. However, those individuals who have been recorded and invested with authority as ministers by their employing meeting do qualify for this exclusion. SECTION 116.-PARTIAL EXCLUSION OF DIVIDENDS RECEIVED BY INDIVIDUALS 26 CFR 1.116-1: Partial exclusion of dividends. Dividends received by individuals as beneficiaries of estates and trusts. See Rev. Rul. 66-70, page 5. SECTION 117.-SCHOLARSHIPS AND FELLOWSHIP GRANTS 26 CFR 1.117-4: Items not considered as scholarships or fellowship grants. (Also Section 61; 1.61–2.) Rev. Rul. 66-83 Stipends paid to an intern performing services for a social service agency, out of funds received by the agency from a foundation to finance an intern training program, are compensation for services rendered even though he is acquiring training and experience in the field of social work. Therefore, such stipends are includible in the gross income of the recipient under section 61 of the Internal Revenue Code of 1954 and not excludable as fellowship grants under section 117 of the Code. Advice has been requested whether, under the circumstances described below, the stipends received by an intern of a social service agency are taxable to the recipient, or whether such amounts are excludable from gross income as fellowship grants. A social service agency has received a grant from a foundation to provide funds for a training program for an intern in the field of community organization and intergroup relations. One purpose of the internship program is to provide the agency with additional staff members at no additional cost to the agency. The taxpayer in the instant case was selected to serve a 1-year internship. He spends at least one-half of each day in "work experience" under the supervision of the regular staff of the agency, which work experience consists of normal work of the agency. The remainder of the day is spent in study, conferences, and report writing. With the exception of the salary scale, the taxpayer is subject to all the provisions of the rules regulating the agency's professional staff. Section 117(a) (1) (B) of the Internal Revenue Code of 1954 excludes from gross income amounts received as fellowship grants.___ A fellowship grant as defined by section 1.117-3 (c) of the Income Tax Regulations generally means an amount paid or allowed to, or for the benefit of, an individual to aid him in the pursuit of study or research. Section 1.117-4 (c) of the regulations provides, in part, that amounts paid to an individual as compensation for past, present, or future employment services are not considered as fellowship grants for the purpose of section 117 of the Code. Section 61 (a) of the Code requires inclusion in gross income of all amounts received as compensation for services, including fees, commissions, and similar items. Under the circumstances described above the intern is primarily performing services for the social service agency even though in the process he is acquiring training and experience in the field of community organization and intergroup relations. See Rev. Rul. 64–212, C.B. 1964-2, 39, and Rev. Rul. 64-213, C.B. 1964-2, 40. Therefore, stipends received by the taxpayer represent compensation for services rendered to the agency and are not amounts received as fellowship grants within the meaning of section 117 of the Code. Accordingly, the stipends received by the taxpayer during the period of internship are includible in his gross income under section 61(a) of the Code and are not excludable as fellowship grants under section 117 of the Code. PART V. DEDUCTIONS FOR PERSONAL EXEMPTIONS SECTION 151.-ALLOWANCE OF DEDUCTIONS FOR PERSONAL EXEMPTIONS 26 CFR 1.151-1: Deductions for personal exemptions. Dependency exemption for an unrelated person who is temporarily absent from her principal place of abode because of illness. See Rev. Rul. 66-28, below. SECTION 152.-DEPENDENT DEFINED 26 CFR 1.152-1: General definition of a de pendent. (Also Section 151; 1.151-1.) Rev. Rul. 66-28 An elderly woman who, because of illness requiring constant medical care, is indefinitely confined to a nursing home is considered to be temporarily absent from her principal place of abode during confinement, for the purpose of determining whether she qualifies as the taxpayer's dependent under section 152(a) (9) of the Internal Revenue Code of 1954. Advice has been requested whether an individual who, because of illness requiring constant medical care, is indefinitely confined to a nursing home is considered to be temporarily absent from her principal place of abode during such confinement, for the purpose of determining whether she qualifies as the taxpayer's dependent under section 152 (a) (9) of the Internal Revenue Code of 1954. The individual concerned is an elderly woman, unrelated to the taxpayer, who had received her chief support from the taxpayer and had been a member of the taxpayer's household before becoming so ill that she required constant medical care and had to be placed in a nursing home. The woman was continuously confined to the nursing home for several years including the entire tax year under consideration and the nature of her illness was such that it appeared she might never return. The taxpayer paid all her expenses in the nursing home because she had no relatives or other source of support. To qualify as a dependent under section 152 (a) (9) of the Code, an individual must, for the taxable year of the taxpayer have as his or her principal place of abode the home of the taxpayer and be a member of the taxpayer's household. According to section 1.152-1 (b) of the Income Tax Regulations, subject to an exception which is not here pertinent, section 152(a) (9) of the Code applies to any individual who lives with the taxpayer and is a member of the taxpayer's household during the entire taxable year of the taxpayer. It is not necessary under section 152 (a) (9) of the Code that the dependent be related to the taxpayer. It is necessary, however, that the taxpayer both maintain and occupy the household. The taxpayer and dependent will be considered as occupying the household for such entire taxable year notwithstanding temporary absences from the household due to special circumstances. Section 1.152–1(b) of the regulations further provides that a nonpermanent failure to occupy the common abode by reason of illness, education, business, vacation, military service, or a custody agreement under which the dependent is absent for less than 6 months in the taxable year of the taxpayer, shall be considered temporary absence due to special circumstances. An identical provision with respect to temporary absence due to special circumstances is contained in section 1.1-2(c) (1) of the regulations under the 1954 Code, relating to rates of tax on heads of households. Section 39.12-4(c) of Regulations 118 under the Internal Revenue Code of 1939, which also contains this same temporary absence provision, has been interpreted by the court in the case of Walter J. Hein v. Commissioner, 28 T.C. 826 (1957) Acquiescence, C.B. 1958–2, 6, to mean that the dependent's stay in a nursing home was a temporary absence due to special circumstances even though it appeared that the elderly lady would be unlikely to return to the taxpayer's household. In view of the decision in the Hein case, a period of time during which a dependent is confined to a nursing home because of illness will likewise be considered a temporary absence due to special circumstances for the purpose of section 152(a) (9) of the Code, even though such absence is for an extended period of time. There must, of course, be an absence of an intent on the part of the taxpayer and the dependent to change the dependent's principal place of abode. The possibility or probability that death might intervene before the dependent returns to the taxpayer's household is not sufficient to make such absence permanent. Accordingly, an elderly woman, who is indefinitely confined to a nursing home because of illness requiring constant medical care, is, during such confinement, considered to be temporarily absent from her principal place of abode, for the purpose of determining whether she qualifies as a dependent under section 152 (a) (9) of the Code. PART VI.-ITEMIZED DEDUCTIONS FOR INDIVIDUALS AND CORPORATIONS SECTION 162.-TRADE OR BUSINESS EXPENSES 26 CFR 1.162-1; Business expenses. Ct. D. 1907 INCOME TAX-INTERNAL REVENUE CODE OF 1954-DECISION OF SUPREME COURT OF THE UNITED STATES 1. LEGAL EXPENSES-CRIMINAL PROSECUTION-PUBLIC POLICY. Legal expenses incurred by a taxpayer in the unsuccessful defense of a business-related criminal prosecution for violations of the Securities Act of 1933 and the mail fraud statute are deductible as ordinary and necessary business expenses under section 162 (a) of the Internal Revenue Code of 1954. 2. JUDGMENT AFFIRMED. Judgment of the United States Court of Appeals for the Second |