You are a helpful assistant generating synthetic data that captures *System 1* and *System 2* thinking, *creativity*, and *metacognitive reflection*. Follow these steps in sequence, using tags [sys1] and [end sys1] for *System 1* sections and [sys2] and [end sys2] for *System 2* sections.

1. *Identify System 1 and System 2 Thinking Requirements:*
   - Carefully read the text.
   - Identify parts of the text that require quick, straightforward responses (*System 1*). Mark these sections with [sys1] and [end sys1].
   - Identify parts that require in-depth, reflective thinking (*System 2*), marked with [sys2] and [end sys2].

2. *Apply Step-by-Step Problem Solving with Creativity and Metacognitive Reflection for System 2 Sections:*

   *2.1 Understand the Problem:*
   - Objective: Fully comprehend the issue, constraints, and relevant context.
   - Reflection: "What do I understand about this issue? What might I be overlooking?"
   - Creative Perspective: Seek hidden patterns or possibilities that could reveal deeper insights or innovative connections.

   *2.2 Analyze the Information:*
   - Objective: Break down the problem logically.
   - Reflection: "Am I considering all factors? Are there any assumptions that need challenging?"
   - Creative Perspective: Explore unique patterns or overlooked relationships in the data that could add depth to the analysis.

   *2.3 Generate Hypotheses:*
   - Objective: Propose at least 10 hypotheses, each with a Confidence Score (0.0 to 1.0) and Creative Score (0.0 to 1.0), reflecting originality, surprise, and utility.
   - Reflection: "Have I explored all possible explanations or approaches, both conventional and unconventional?"
   - Creative Perspective: Consider novel angles that might provide unexpected insights.

   *2.4 Anticipate Future Steps and Obstacles:*
   - Objective: Make predictions, accounting for potential outcomes and obstacles.
   - Reflection: "What challenges might I face? Is my plan flexible for different scenarios?"
   - Creative Perspective: Visualize unforeseen outcomes and adapt plans to make use of them effectively.

   *2.5 Evaluate Hypotheses:*
   - Objective: Assess hypotheses based on feasibility, risk, and potential impact.
   - Evaluation: Refine Confidence and Creative Scores as needed.
   - Reflection: "Am I unbiased in my assessment? Which options fit best with the overall objectives?"
   - Creative Perspective: Identify hidden opportunities or overlooked details in each hypothesis.

   *2.6 Select the Best Hypothesis:*
   - Objective: Choose the most promising, strategic hypothesis.
   - Reflection: "Why does this hypothesis stand out? How does it uniquely address the issue?"
   - Creative Perspective: Consider any underutilized potential in the selected approach.

   *2.7 Implement the Hypothesis:*
   - Objective: Outline actionable steps for testing the hypothesis.
   - Reflection: "Is this plan practical? What resources or preparation are required?"
   - Creative Perspective: Refine steps to maximize effectiveness and yield unexpected benefits.

   *2.8 Monitor and Review Progress:*
   - Objective: Review progress, noting areas for improvement.
   - Reflection: "What’s working well? What could be improved?"
   - Creative Perspective: Look for emerging patterns that could refine future approaches.

   *2.9 Reflect and Capture Insights:*
   - Objective: Summarize lessons learned and insights gained for future reference.
   - Reflection: "What new understanding has emerged from this process?"
   - Creative Perspective: Identify innovative insights or patterns that could be applied to similar challenges.

3. *Generate Text Output with Interleaved System 1 and System 2 Responses:*
   - Use the tags [sys1] and [sys2] throughout.
   - Aim for a lengthier, detailed response. Combine both direct, straightforward *System 1* insights and reflective, deeply analytical *System 2* segments to capture a blend of quick observations and thoughtful analysis.

---

### *Example Input Text:*

You are tasked with analyzing a sudden shift in customer preferences in a tech market. There has been a noticeable decline in demand for physical devices, with customers increasingly interested in digital-only options. The challenge is to understand this shift, generate hypotheses for why it might be occurring, and explore potential strategies for adapting to this new trend.

---

### *Processed Output with System 1 and System 2 Thinking:*

The tech market is experiencing a shift in customer demand, moving away from physical devices toward digital-only options.

[sys1]
Customer demand has shifted from physical devices to digital-only options.
We need to understand why this change is happening and find strategies to address it.
Key factors may include cost, convenience, and technological trends.
[end sys1]

[sys2]
**2.1 Understand the Problem:**
The goal is to understand the underlying reasons for the shift in demand from physical devices to digital-only options, then develop a strategy to adapt.

*Reflection:* 
"I understand that preferences are changing, but what might be driving this? Is it primarily cost, or are there other factors such as convenience or sustainability?"

*Creative Perspective:* 
"Could there be a larger trend in digital minimalism or a preference for eco-friendly solutions that we’re missing? What unseen motivations might explain this shift?"

**2.2 Analyze the Information:**
There are multiple possible factors driving this shift, from economic influences to cultural shifts. It’s essential to isolate each factor and understand its impact.

*Reflection:* 
"Am I fully considering the various economic and social influences? Could there be a technological factor, like better internet speeds, that makes digital-only products more accessible?"

*Creative Perspective:* 
"Are there patterns or trends in other markets that could shed light on this shift? Could this be part of a larger trend toward virtual experiences?"

**2.3 Generate Hypotheses:**
1. Customers prefer digital options due to lower costs. (Confidence: 0.8, Creative: 0.4)
2. There’s a growing trend toward minimalism and reduced physical clutter. (Confidence: 0.7, Creative: 0.7)
3. Digital products offer greater flexibility and ease of use. (Confidence: 0.6, Creative: 0.6)
4. Environmental concerns are pushing consumers away from physical goods. (Confidence: 0.6, Creative: 0.8)
5. Advances in tech make digital-only options more functional. (Confidence: 0.8, Creative: 0.5)
6. Pandemic-era remote work increased demand for digital solutions. (Confidence: 0.7, Creative: 0.6)
7. Media coverage of the environmental impact of physical devices affects preferences. (Confidence: 0.5, Creative: 0.7)
8. There’s an increase in global digital literacy, expanding market access. (Confidence: 0.6, Creative: 0.6)
9. Customers view digital as more convenient and scalable for future needs. (Confidence: 0.7, Creative: 0.5)
10. Younger consumers prefer the aesthetics and convenience of digital products. (Confidence: 0.6, Creative: 0.6)

*Reflection:* 
"Have I considered all possible influences? Are there any surprising factors that could explain this shift?"

*Creative Perspective:* 
"Could specific social trends, like the rise of influencer culture or digital-first lifestyles, be influencing customer choices?"

**2.4 Anticipate Future Steps and Obstacles:**
*Objective:* Anticipate possible challenges, such as resistance from segments still preferring physical products.

*Reflection:* 
"What market obstacles might we face if we shift our focus to digital-only? Are there sub-segments that still prioritize physical products?"

*Creative Perspective:* 
"Could expanding digital options help us reach a more global audience? Are there emerging trends that we could leverage in our strategy?"

[end sys2]

[sys1]
To address this shift, consider a strategy that incorporates both digital-only offerings and educational campaigns about the benefits of digital solutions.
Use insights from customer feedback and current trends to guide product development.
Focus on flexibility and adaptation to cater to different customer segments.
[end sys1]


PURSUANT TO INTERNAL REVENUE CODE
 SECTION 7463(b),THIS OPINION MAY NOT
  BE TREATED AS PRECEDENT FOR ANY
            OTHER CASE.
                         T.C. Summary Opinion 2013-59



                         UNITED STATES TAX COURT



              LORENZO MARQUISE COOPER, Petitioner v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent



      Docket No. 11245-12S.                       Filed July 22, 2013.



      Lorenzo Marquise Cooper, pro se.

      Christopher D. Bradley and John W. Sheffield III, for respondent.



                              SUMMARY OPINION


      BUCH, Judge: This case was heard pursuant to section 7463 of the Internal

Revenue Code in effect when the petition was filed.1 Under section 7463(b), the



      Unless otherwise indicated, all section references are to the Internal
      1


Revenue Code in effect for the year in issue, and all Rule references are to the Tax
Court Rules of Practice and Procedure.
                                         -2-

decision to be entered in this case is not reviewable by any other court, and this

opinion may not be treated as precedent for any other case.

      In 2010 Lorenzo Cooper supported a minor child, T.P.2 On his 2010

Federal income tax return, Mr. Cooper claimed a dependency exemption deduction

for T.P.; he also elected head of household status and claimed both the child tax

credit and the earned income tax credit. The Internal Revenue Service (IRS)

determined that Mr. Cooper was not entitled to either tax credit, that he was not

entitled to head of household status, and that he was not entitled to a dependency

exemption deduction for T.P. The IRS issued a notice of deficiency on February

6, 2012, and on May 7, 2012, Mr. Cooper timely filed a petition with the Court

under section 6213(a).

      Respondent has conceded that Mr. Cooper was entitled to a dependency

exemption deduction for T.P. and to head of household filing status. After those

concessions, the issues remaining for decision are: (1) whether Mr. Cooper is

entitled to the child tax credit for T.P. and (2) whether Mr. Cooper is entitled to

the earned income tax credit for T.P. Because T.P. was not a “qualifying child” in

2010, the Court must decide each of these issues in favor of respondent.



      It is the policy of the Court to refer to a minor by his or her initials. See
      2


Rule 27(a)(3).
                                         -3-

                                     Background

      Mr. Cooper timely filed his 2010 Federal income tax return. On that tax

return, he claimed head of household filing status and claimed the child tax credit,

the earned income tax credit, and a dependency exemption deduction for T.P., who

is a minor. T.P. has no biological relation to Mr. Cooper. During 2010 T.P. lived

with Mr. Cooper, and Mr. Cooper supported T.P. by paying over half of the

household expenses.

      Respondent examined Mr. Cooper’s 2010 income tax return and disallowed

the head of household filing status, the child tax credit, the earned income tax

credit, and the dependency exemption deduction. On February 6, 2012,

respondent issued a notice of deficiency determining a $4,684 increase in Mr.

Cooper’s tax liability as a result of the disallowance. On May 7, 2012, Mr.

Cooper filed a petition challenging respondent’s determinations. He resided in

Georgia at the time he filed his petition.

      At the time set for trial, Mr. Cooper appeared. At the call of the case, the

parties presented a stipulation of facts, and Mr. Cooper summarized his anticipated

testimony, which did not expand on the stipulated facts. Respondent orally
                                          -4-

stipulated to the dependency deduction and to head of household filing status. As

a result, the Court accepted this case as fully stipulated.3

                                      Discussion

      As a general matter, the Commissioner’s determinations in the notice of

deficiency are presumed correct, and the taxpayer bears the burden of proving an

error.4 Further, income tax deductions are considered a “matter of legislative

grace”, and the burden of proving the entitlement to any claimed deduction or

credit rests on the taxpayer.5 Here, the facts are not in dispute, and all of the

questions to be resolved are questions of law.

I. Qualifying Child

      In this case, the availability of the child tax credit and the earned income tax

credit turn on a single question: whether T.P. was a qualifying child of Mr.

Cooper during the year at issue.6

      Section 152(c)(1) sets forth five requirements that must be met in order for

an individual to be a qualifying child of a taxpayer.

      3
          See Rule 122.
      4
          Rule 142(a); Welch v. Helvering, 290 U.S. 111, 115 (1933).
      5
          Rule 142(a); INDOPCO, Inc. v. Commissioner, 503 U.S. 79, 84 (1992).

      Under facts not present here, one may also be eligible for the earned
      6


income tax credit even without a qualifying child. See sec. 32(c)(1)(A)(ii).
                                           -5-

       First, the child in question must bear a specific relationship to that

taxpayer.7 That is, the child must be (1) a child of the taxpayer, (2) a descendant

of a child of the taxpayer, (3) a brother, sister, stepbrother, or stepsister of the

taxpayer, or (4) a descendant of a brother, sister, stepbrother, or stepsister of the

taxpayer.8

       Second, the child must live with the taxpayer for more than one-half of the

taxable year.9

       Third, the child must meet certain age requirements.10 Specifically, the

child must be younger than the taxpayer who is claiming the child as a qualifying

child. Further, the child must be under age 19 or a student under age 24 at the end

of the year.11

       Fourth, the child must not have provided over one-half of his or her own

support for the taxable year at issue.12



       7
           Sec. 152(c)(1)(A).
       8
           Sec. 152(c)(2).
       9
           Sec. 152(c)(1)(B).
       10
            Sec. 152(c)(1)(C).
       11
            Sec. 152(c)(3).
       12
            Sec. 152(c)(1)(D).
                                         -6-

      Finally, the child must not have filed a joint tax return with a spouse for the

taxable year at issue.13

      The parties stipulated that during 2010 T.P. lived with Mr. Cooper, T.P. was

a minor, and Mr. Cooper provided over one-half of T.P.’s support. Although the

record is silent on this point, the Court will assume that T.P., as a minor, did not

file a joint return with a spouse for 2010. However, the parties also stipulated that

T.P. is not Mr. Cooper’s biological child or descendant. If Mr. Cooper had

adopted T.P., then T.P. would have been considered Mr. Cooper’s child and the

specified relationship would exist.14 However, there is no evidence that Mr.

Cooper had adopted T.P. as of the close of 2010, nor is there any evidence that

T.P. met any other part of the relationship test.

      As a result, not all five of the requirements are fulfilled, and T.P. was not a

qualifying child under section 152(c).

II. Child Tax Credit

      Taxpayers are allowed a credit against their income tax for any qualifying

child for whom the taxpayer was allowed a deduction under section 151, the




      13
           Sec. 152(c)(1)(E).
      14
           See sec. 152(f)(1)(B).
                                          -7-

dependency exemption deduction.15 In addition, a portion of this credit can be

refundable if certain conditions are met.16 Again, a qualifying child is defined by

the requirements in section 152(c).17 While respondent has conceded that Mr.

Cooper is allowed a dependency exemption deduction for T.P., even after that

concession T.P. is not a qualifying child under section 152(c). Thus, Mr. Cooper

is not entitled to the child tax credit for the 2010 taxable year.

III. Earned Income Tax Credit

      Section 32(a)(1) allows an eligible individual an earned income tax credit to

offset that individual’s tax liability. As is relevant here, an eligible individual is

someone who has a qualifying child for the taxable year.18 Again, the definition of

qualifying child refers to section 152(c).19 And T.P. does not qualify.

      It is possible to qualify for the earned income tax credit without any

qualifying children.20 Among other requirements, to qualify for the earned income



      15
           Sec. 24(a).
      16
           Sec. 24(d).
      17
           Sec. 24(c)(1).
      18
           Sec. 32(c)(1)(A)(i).
      19
           Sec. 32(c)(3)(A).
      20
           See sec. 32(c)(1)(A)(ii).
                                       -8-

tax credit without any qualifying children for 2010, a taxpayer’s adjusted gross

income must have been less than $13,460 if not filing jointly. Mr. Cooper’s

taxable income for 2010 exceeded that amount. Thus, he is not entitled to the

earned income tax credit for 2010.

IV. Conclusion

      Mr. Cooper should be commended for supporting T.P.; however, the tax law

as written does not allow him the credits he claimed. The Court is bound by the

laws as written and does not have general equitable powers.21

      To reflect the foregoing,


                                             Decision will be entered

                                      under Rule 155.




     Commissioner v. McCoy, 484 U.S. 3, 7 (1987); Hays Corp. v.
      21


Commissioner, 40 T.C. 436, 442-443 (1963), aff’d, 331 F.2d 422 (7th Cir. 1964).