Rev. Rul. 55-347

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Revenue Ruling 55-347

Internal Revenue Service

1955-1 C.B. 21

Rev. Rul. 55-347

An appointment to the United States Military Academy, the United States Naval Academy, the United States Air Force Academy or the United States Coast Guard Academy does not constitute a scholarship award within the meaning of section 152(d)(2) of the Internal Revenue Code of 1954. In the absence of evidence establishing that a taxpayer furnished more than half of the support of a cadet or midshipman and that the other requirements of section 151(a) of the Code are met, an exemption for a dependent is not allowable.

Advice has been requested whether an appointment to the United States Military Academy constitutes a scholarship award not to be considered in the determination of the amount of support furnished a dependent.

The taxpayer's son in the instant case is a cadet in the United States Military Academy. He receives monthly pay and allowances, and pays for his meals, uniforms, text books, etc. Taxes are withheld at the source from his wages. During vacations and holidays the son resides with the taxpayer.

Section 152 of the Internal Revenue Code of 1954 provides in part as follows:

(d) SPECIAL SUPPORT TEST IN CASE OF STUDENTS.-For purposes of subsection (a), in the case of any individual who is-

(2) a student (within the meaning of section 151(e)(4)), amounts received as scholarships for study at an educational institution (as defined in section 151(e)(4)) shall not be taken into account in determining whether such individual received more than half of his support from the taxpayer.

A scholarship is generally considered as an allowance to a student at an educational institution to aid him in pursuing his studies. Such a student does not receive wages nor is he usually obligated to perform any services for the institution subsequent to graduation. The opposite is true with respect to a cadet in the Military Academy. He is considered as being in the "Regular Army" and receives pay and allowances for the performance of services as a cadet, from which income tax is withheld. The Army Organization Act of 1950, 64 Stat. 263, at 268, 10 U.S.C. 1c(b). An obligation exists on the part of a cadet by reason of the articles of agreement signed by him upon entrance into the Academy to complete the course of training and to accept a commission in the Regular Army upon graduation. Act of June 30, 1950, Public Law 586, 81st Congress, 64 Stat. 304, 10 U.S.C. 1092c.

The rules governing the appointment of cadets, including the pay and allowances, apply equally to midshipmen at the United States Naval Academy, cadets at the United States Coast Guard Academy and cadets at the United States Air Force Academy. See Career Compensation Act of 1949, 63 Stat. 802, at 828, as amended 37 U.S.C. 308; Act of August 1949; Public Law 207, 81st Congress, 63 Stat. 495, at 508, 14 U.S.C. 182; Air Force Academy Act, 68 Stat. 47, 10 U.S.C. 1854.

Accordingly, it is held that an appointment to the United States Military Academy, the United States Naval Academy, the United States Air Force Academy, or the United States Coast Guard Academy does not constitute a scholarship award within the meaning of section 152(d)(2) of the Code. Therefore, in the absence of evidence establishing that the taxpayer furnished more than half of the support of a cadet or midshipman and that the other requirements of section 151(e) of the Code are met, an exemption for a dependent is not allowable

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