(2) Definition of head of household. For purposes of this subtitle, an individual shall be considered a head of a household if, and only if, such individual is not married at the close of his taxable year, is not a surviving spouse (as defined in section 2 (b)), and either

(A) Maintains as his home a household which constitutes for such taxable year the principal place of abode, as a member of such household, of

(1) A son, stepson, daughter, or stepdaughter of the taxpayer, or a descendant of a son or daughter of the taxpayer, but if such son, stepson, daughter, stepdaughter, or descendant is married at the close of the taxpayer's taxable year, only if the taxpayer is entitled to a deduction for the taxable year for such person under section 151, or (11) Any other person who is a dependent of the taxpayer, if the taxpayer is entitled to a deduction for the taxable year for such person under section 151, or

(B) Maintains a household which constitutes for such taxable year the principal place of abode of the father or mother of the taxpayer, if the taxpayer is entitled to a deduction for the taxable year for such father or mother under section 151.

For purposes of this paragraph and of section 2 (b) (1) (B), 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.

(3) Determination of status. For purposes of this subsection

(A) A legally adopted child of a person shall be considered a child of such person by blood;

(B) An individual who is legally separated from his spouse under a decree of divorce or of separate maintenance shall not be considered as married;

(C) A taxpayer shall be considered as not married at the close of his taxable year if at any time during the taxable year his spouse is a nonresident alien; and

(D) A taxpayer shall be considered as married at the close of his taxable year if his spouse (other than a spouse described in subparagraph (C)) died during the taxable year.

(4) Limitations. Notwithstanding paragraph (2), for purposes of this subtitle a taxpayer shall not be considered to be a head of a household

(A) If at any time during the taxable year he is a nonresident alien; or

(B) By reason of an individual who would not be a dependent for the taxable year but for

(1) Paragraph (9) of section 152 (a), (11) Paragraph (10) of section 152 (a), or (111) Subsection (c) of section 152.

(c) Special rules. The tax imposed by subsection (a), and the tax imposed by

paragraph (1) of subsection (b), consists of

(1) A normal tax of 3 percent of the taxable income, and

(2) A surtax equal to (A) the amount determined in accordance with the table in subsection (a) or paragraph (1) of subsection (o), minus (B) the normal tax. The tax shall in no event exceed 87 percent of the taxable income for the taxable year. (d) Cross reference. For definition of taxable income, see section 63.

§ 1.1-1

Income tax on individuals.

(a) General rule. (1) Section 1(a) of the Code imposes an income tax on every individual, resident or nonresident, other than a head of a household to whom section 1(b) applies or a nonresident alien individual subject to the tax imposed by section 871(a). This tax consists of a normal tax and a surtax. See section 1(c). For optional tax in the case of taxpayers with adjusted gross incomes of less than $5,000, see section 3. The tax imposed by section 1(a) is upon taxable income (determined by subtracting the allowable deductions from the gross income). The tax is determined in accordance with the table contained in section 1(a). In certain cases credits are allowed against the amount of the tax. See part IV (section 31 and following, subchapter A, chapter 1 of the Code. In general, the tax is payable upon the basis of returns rendered by persons liable therefor (subchapter A (section 6001 and following), chapter 61 of the Code) or at the source of the income. For computation of tax in the case of a joint return of husband and wife, or a return of a surviving spouse, see section 2. For other rates of tax on individuals, see section 5(a). See part III (section 551 and following), subchapter G, chapter 1 of the Code, as to shareholders of foreign personal holding companies. See subchapter P (section 1201 and following), chapter 1 of the Code, as to the treatment of capital gains and losses.

(2) The income tax imposed by section 1 (a) upon any amount of taxable income is computed by adding to the income tax for the bracket in which that amount falls in the table in section 1 (a) the income tax upon the excess of that amount over the bottom of the bracket at the rate indicated in the table. Accordingly, the income tax for a taxable year beginning after December 31, 1953,

(b) Citizens or residents of the United States liable to tax. In general, all citizens of the United States, wherever resident, and all resident alien individuals are liable to the income taxes imposed by the Code whether the income is received from sources within or without the United States. A nonresident alien individual who is a bona fide resident of Puerto Rico during the entire taxable year is, in general, subject to taxation in the same manner as a resident alien individual. See section 876, relating to alien residents of Puerto Rico. As to tax on nonresident alien individuals, see section 871.

(c) Who is a citizen. Every person born or naturalized in the United States and subject to its jurisdiction is a citizen. For rules governing loss of citizenship, see sections 349 to 357, inclusive, of the Immigration and Nationality Act (8 U.S.C. 1481-1489). A foreigner who has filed his declaration of intention of becoming a citizen but who has not yet been admitted to citizenship by a final order of a naturalization court is an alien. § 1.1-2 holds.

Rates of tax on heads of house

(a) General rule. An individual who is the head of a household under the rules prescribed in section 1(b) is subject to the income tax imposed by that section instead of the income tax imposed by section 1(a).

(b) Definition of head of household. (1) For the purpose of section 1 (b), the taxpayer shall be considered the head of a household if, and only if, he is not married at the close of his taxable year, is not a surviving spouse (as defined in section 2 (b)), and (i) maintains as his home a household which constitutes for such taxable year the principal place of abode, as a member of such household, of at least one of the individuals described in section 1 (b) (2) (A), or (ii) maintains (whether or not as his home) a household which constitutes for such taxable year the principal place of abode of one of the individuals described in section 1 (b) (2) (B).

(2) Under no circumstances shall the same person be used to qualify more than one taxpayer as the head of a household for the same taxable year.

(3) Subparagraph (A) of section 1 (b) (2) provides that any of the following persons may qualify the taxpayer as a head of a household:

(i) A son, stepson, daughter, or stepdaughter of the taxpayer, or a descendant of a son or daughter of the taxpayer. For the purpose of determining whether any of the stated relationships exist, a legally adopted child of a person is considered a child of such person by blood. If any such person is not married at the close of the taxable year of the taxpayer, the taxpayer may qualify as the head of a household by reason of such person even though the taxpayer may not claim a deduction for such person under section 151, for example, because the taxpayer does not furnish more than half of the support of such person. However if any such person is married at the close of the taxable year of the taxpayer, the taxpayer may qualify as the head of a household by reason of such person only if the taxpayer is entitled to a deduction for such person under section 151 and the regulations thereunder. In applying the preceding sentence there shall be disregarded any such person for whom a deduction is allowed under section 151 only by reason of section 152 (c) (relating to persons covered by a multiple support agreement).

(ii) Any other person who is a dependent of the taxpayer, if the taxpayer is entitled to a deduction for the taxable year for such person under section 151 and the regulations thereunder. Under section 151 the taxpayer may be entitled to a deduction for any of the following persons:

(a) His brother, sister, stepbrother, or stepsister;

(b) His father or mother, or an ancestor of either:

(c) His stepfather or stepmother; (d) A son or a daughter of his brother or sister:

(e) A brother or sister of his father or mother; or

(f) His son-in law, daughter-in-law, father-in-law, mother-in-law, brotherin-law or sister-in-law;

if such person has a gross income of less than $600 for the calendar year in

which the taxable year of the taxpayer begins, if the taxpayer supplies more than one-half of the support of such person for such calendar year and if such person does not make a joint return with his spouse for the taxable year beginning in such calendar year. The taxpayer may not be considered to be a head of a household by reason of any person for whom a deduction is allowed under section 151 only by reason of section 152 (a) (9), 152 (a) (10), or 152 (c) (relating to persons not related to the taxpayer, persons receiving institutional care, and persons covered by multiple support agreements).

(4) Subparagraph (B) of section 1 (b) (2) provides that the father or mother of the taxpayer may qualify the taxpayer as a head of a household, but only if the taxpayer is entitled to a deduction for the taxable year for such father or mother under section 151 (determined without regard to section 152 (c)). For example, an unmarried taxpayer who maintains a home for his widowed mother may not qualify as the head of a household by reason of his maintenance of a home for his mother if his mother has gross income of $600 or more in the calendar year in which his taxable year begins, or if he does not furnish more than one-half of the support of his mother for such calendar year. For purposes of subparagraph (B) of section 1 (b) (2), a person who legally adopted the taxpayer is considered the father or mother of the taxpayer.

(5) For the purpose of section 1 (b), the status of the taxpayer shall be determined as of the close of the taxpayer's taxable year. A taxpayer shall be considered as not married if at the close of his taxable year he is legally separated from his spouse under a decree of divorce or separate maintenance, or if at any time during the taxable year the spouse to whom the taxpayer is married at the close of his taxable year was a nonresident alien. A taxpayer shall be considered married at the close of his taxable year if his spouse (other than a spouse who is a nonresident alien) dies during such year.

(6) If the taxpayer is a nonresident alien during any part of the taxable year he may not qualify as a head of a household even though he may comply with the other provisions of section 1 (b). See the regulations prescribed under

section 871 for a definition of nonresident alien.

(c) Household. (1) In order for the taxpayer to be considered a head of a household by reason of any individual described in subparagraph (A) of section 1 (b) (2), the household must actually constitute the home of the taxpayer for his taxable year. A physical change in the location of such home will not prevent a taxpayer from qualifying as a head of a household. Such home must also constitute the principal place of abode of at least one of the persons specified in such subparagraph (A). It is not sufficient that the taxpayer maintain the household without being its occupant. The taxpayer and such other person must occupy the household for the entire taxable year of the taxpayer. However, the fact that such other person is born or dies within the taxable year will not prevent the taxpayer from qualifying as a head of household if the household constitutes the principal place of abode of such other person for the remaining or preceding part of such taxable year. The taxpayer and such other person will be considered as occupying the household for such entire taxable year notwithstanding temporary absences from the household due to special circumstances. A nonpermanent failure to occupy the common abode by reason of illness, education, business, vacation, military service, or a custody agreement under which a child or stepchild is absent for less than six months in the taxable year of the taxpayer, shall be considered temporary absence due to special circumstances. Such absence will not prevent the taxpayer from qualifying as the head of a household if (i) it is reasonable to assume that the taxpayer or such other person will return to the household, and (ii) the taxpayer continues to maintain such household or a substantially equivalent household in anticipation of such return.

(2) In order for the taxpayer to be considered a head of a household by reason of any individual described in subparagraph (B) of section 1 (b) (2), the household must actually constitute the principal place of abode of the taxpayer's dependent father or mother, or both of them. It is not, however, necessary for the purposes of such subparagraph for the taxpayer also to reside in such place of abode. A physical change in the location of such home will not prevent a taxpayer from qualifying as a

head of a household. The father or mother of the taxpayer, however, must occupy the household for the entire taxable year of the taxpayer. They will be considered as occupying the household for such entire year notwithstanding temporary absences from the household due to special circumstances. For example, a nonpermanent failure to occupy the household by reason of illness or vacation shall be considered temporary absence due to special circumstances. Such absence will not prevent the taxpayer from qualifying as the head of a household if (i) it is reasonable to assume that such person will return to the household, and (ii) the taxpayer continues to maintain such household or a substantially equivalent household in anticipation of such return. However, the fact that the father or mother of the taxpayer dies within the year will not prevent the taxpayer from qualifying as a head of a household if the household constitutes the principal place of abode of the father or mother for the preceding part of such taxable year.

(d) Cost of maintaining a household. The taxpayer shall be considered as maintaining a household only if he pays more than one-half the cost thereof for his taxable year. The cost of maintaining a household shall be the expenses incurred for the mutual benefit of the occupants thereof by reason of its operation as the principal place of abode of such occupants for such taxable year. The cost of maintaining a household shall not include expenses otherwise incurred. The expenses of maintaining a household include property taxes, mortgage interest, rent, utility charges, upkeep and repairs, property insurance, and food consumed on the premises. Such expenses do not include the cost of clothing, education, medical treatment, vacations, life insurance, and transportation. In addition, the cost of maintaining a household shall not include any amount which represents the value of services rendered in the household by the taxpayer or by a person qualifying the taxpayer as a head of a household.

§ 1.1-3 Limitation on tax.

The tax imposed by section 1 (whether by subsection (a) or subsection (b) thereof) shall not exceed 87 percent of the taxable income for the taxable year. For purposes of determining this limita

tion the tax under section 1 (a) or (b) and the tax at the 87-percent rate shall each be computed before the allowance of any credits against the tax. Where the alternative tax on capital gains is imposed under section 1201(b), the 87percent limitation shall apply only to the partial tax computed on the taxable income reduced by 50 percent of the excess of net long-term capital gains over net short-term capital losses. Where, for purposes of computations under the income averaging provisions, section 1201 (b) is treated as imposing the alternative tax on capital gains computed under section 1304(e) (2), the 87-percent limitation shall apply only to the tax equal to the tax imposed by section 1, reduced by the amount of the tax imposed by section 1 which is attributable to capital gain net income for the computation year.

[T.D. 6885, 31 F.R. 7802, June 2, 1966] § 1.1-4 Determination of normal tax and

surtax.

The tax imposed by section 1 (whether by subsection (a) or by subsection (b) thereof) consists of a normal tax and a surtax. The normal tax equals 3 percent of the taxable income of the taxpayer and the surtax equals the remaining part of the combined tax computed in accordance with the tables in subsection (a) and subsection (b) of section 1 and with the limitation on tax in subsection (c) of section 1.

§ 1.1-5 Change in rates applicable to taxable year.

For computation of the tax for a taxable year during which a change in the tax rates occurs, see section 21 and the regulations thereunder.

§ 1.2 Statutory provisions; tax in case of joint return or return of surviving

spouse.

SEC. 2. Tax in case of joint return or return of surviving spouse-(a) Rate of tax. In the case of a joint return of a husband and wife under section 6013, the tax imposed by section 1 shall be twice the tax which would be imposed if the taxable income were cut in half. For purposes of this subsection, section 3, and section 141, a return of a surviving spouse (as defined in subsection (b)) shall be treated as a joint return of a husband and wife under section 6013.

(b) Definition of surviving spouse-(1) In general. For purposes of subsection (a), the term "surviving spouse" means a taxpayer