T.C. Sum m ary Opi ni on 20 13 -6 8

UNITED STAT ES TAX COURT
JOHN K. EDGE, Pet it io ne r v. COMM ISSI ONER OF INTERNAL REVENUE, Resp on de nt

Doc ke t No . 20 05 4- 12 S. Fil edAug us t 1 9, 2 01 3.

Jo hn K. Edge , pro se. Em il e Lou is Hebe rt I II, fo r res po nd en t.

SUMM ARY OPINION ARMEN, Sp eci al Trial Ju dg e: Thi s ca se was h eardpu rs ua ntto th e pr ov is io ns of s ect io n 7 46 3 o f th e In te rn al Rev enue Co de ineffe ctwhen th e pe ti ti on was fi le d. Pur su an t t o s ect io n 7 46 3( b) , th e d eci si onto be en te redis no t 1
Unl es s o th erwi se in di cat ed , all subs eque ntsec ti on refe ren ces are t o t he 1 (co nt in ue d...)- 2 -

rev ie wab le by any

ot he r co urt, an d thi s o pi ni on sh al l n otbe tre at edas p rece de nt fo r an y ot he r cas e. Res po nd en t d et erm in eda de fic ie nc y inpe ti ti on er’s 2 01 1 F ed eral in co m e ta x of $6 ,72 5 a ndanaccuracy-rela te d p en al ty of $1 ,34 5 p ur su an t t o s ect io n 6 66 2( a). Afte r co nc es si on s b y

res po nd en t, th e is su es rem ai ni ng forde ci si on are wh ethe r

2 pe ti ti on er i s: (1) en ti tl edto a de pe nd en cy ex em pt io n d educ ti on forSh aro n Ro dg ers ; (2 ) en ti tl edto anearn edin co m e cre di t (EIC ) with re sp ectto D.R. and M.R.; (3) en ti tl edto th e ch il d t ax cred itan d a n a dd it io na l ch il d t ax cred itforD.R.

3
an d M .R.; an d (4 ) li ab le for th e acc ur acy-rela te d p en al ty und er s ect io n 6 66 2( a). Bac kg ro un d So m e o f th e fac ts ha ve be enst ip ul at ed , andth ey are s o fo un d. We in co rp or at e b y

refe ren ce the pa rti es ’ st ip ul at io n o f fac ts an d a cco m panyin g

(...co nt inue d) 1 In te rn al Rev enue Co de ineffe ctforth e y ear i n i ss ue ; al l Ru le refe ren ces are t o the Tax Co urt Ru le s o f Prac ti ce an d P ro cedur e. Res po nd en t co nc ed es th atpe ti ti on er i s en ti tl edto de pe nd en cy ex em pt io n 2 de du ct io ns forD.R. andM.R. an d t ha t p et it io ne r is en ti tl edto he adof h ou se ho ld fil in g s ta tu s. Re sp on de ntals o c on ced es th atpe ti ti on er i s en ti tl edto anEIC witho uta qu al ifyin g c hi ldbu t n otwith re sp ectto D.R. andM.R. Thi s C ou rt r efer s t o m in or s b y th ei r in it ia ls . See Ru le 27 (a)( 3)
. 3- 3 -

ex hi bi ts . Peti ti on er re si de d i n t he Sta te of Lo ui si an a atth e ti m e th e p et it io n was fil ed
. In20 11 pe ti ti on er was em pl oyed fu ll ti m e as a co okan d e arn edwage s o f $8 ,72 7. To supp le m en t thi s i nc om e, pe ti ti on er al so sea rch edforroo fin g jo bs , se cu rin g e no ug h wo rkto earn ad di ti on al gro ss in co m e o f $7 ,39 8 i n 2 01 1. Pet it io ne r’s to ta l g ro ss in co m e in 20 11 , th eref or e, was $1 6,1 25 . Dur in g 2 01 1 p et it io ne r res id edwith a ndsupp orte d h is fia nc é Lis a Ro dg ers , he r two ch il dr en , D.R. andM.R., an d h er m othe r, Sh aro n R od ge rs . Peti ti on er i s no t the bi ol og ic al fathe r of eit he r D.R. orM.R. Des pi te att em pt s t o d o s o, pe ti ti on er h as be enun su cces sf ul inleg al ly ado pt in g D.R. an d M .R. Pet it io ne r an d Lis a Ro dg ers be cam e en ga ge d s om et im e in 20 11 bu t h adno t yet m arri edat t he ti m e o f tr ia l. On o r aro un d Dec em

be r 13 , 20 11 , Sha ro n R od ge rs tra ve le d t o F lo rid a fo r a Ch ris tm as ho li da y

va cat io n. Onor a ro un d Dec em be r 28 , 20 11 , sh e returne d fr om he r va cat io n, b utsh e m ov edou t o f pe ti ti on er’s h om e a few d ay s l at er. Pet it io ne r pa ida co m

m erci al tax return p rep arer(co m m erci al pre pa rer) , who ha d p rep aredpe ti ti on er’s t ax returns forsev eral y ears , to pre pa re h is Fed eral in co m e ta x re tu rnfor20 11 (ta x re tu rn ). In t ha t re gard , pet it io ne r an d Li saRo dg ers m etwith t he co m

m erci al pre pa rer t o d is cu ss th e p rep arat io n o f th e ta x re tu rn ,- 4 -

in cl ud in g t he de ta il s o f th ei r rel at io ns hi p a ndli vi ng arrang em en t wi th res pe ctto Sh aro n R od ge rs , D.R., andM.R. As re le va nthe rei n, an d p ur su an t t o h is
co m m erci al pre pa rer’s advi ce, p et it io ne r cl ai m eda de pe nd en cy ex em pt io n de du ct io n fo r Sh aro n R od ge rs an d D.R. (b utno t M .R.). Als o p ur su an t t o h is
co m m erci al pre pa rer’s advi ce, p et it io ne r cl ai m edth e EIC, th e ch il d t ax cred it , and th e ad di ti on al ch il d t ax cred it , cla im in g D.R. (b utno t M .R.) as a qu al ifyin g c hi ld with re sp ectth eret o. Mo reo ve r, pe ti ti on er m etwith t he co m m erci al pre pa rer t o rev ie w th e ta x re tu rnbe fo re i t was fil ed
. Res po nd en t s ub se qu en tl y is su eda no ti ce o f de fic ie nc y inwhi chhe di sa ll owe d, i nt er al ia , pet it io ne r’s de pe nd en cy ex em pt io n d educ ti on forSh aro n Ro dg ers as we ll as t he EIC, th e ch il d t ax cred it , andth e ad di ti on al ch il d t ax cred it pe ti ti on er cl ai m edwith re sp ectto D.R. In the no ti ce re sp on de ntals o d et erm in ed th atpe ti ti on er was li ab le forth e acc ur acy-rela te d p en al ty. Pet it io ne r ti m el y

fil eda pe ti ti on forred et erm in at io n o f th e d efi ci en cy an d pe na lty an d a ss ert edth athe was e nt it le d t o a n a dd it io na l d ep en de nc y ex em pt io n de du ct io n, EIC, c hi ldtax cred it , andad di ti on al ch il d t ax cred itwith re sp ectto M.R. fo r 20 11 . 4
As n ot edab ov e, res po nd en t co nc ed es th atpe ti ti on er i s en ti tl edto a 4 de pe nd en cy

ex em pt io n d educ ti on forM.R. i n 2 01 1. Se e supr a n ot e 2 .- 5 - Dis cu ss io n A. Burd enof P ro of Gen eral ly, th e Co m

m is si on er’s d et erm in at io ns are p res um edco rrec t, an d the ta xp ay er b ears th e b ur de n o f pr ov in g t ha t tho se de te rm in at io ns are erro ne ou s. Ru le 14 2( a); W el chv. Hel ve rin g, 2 90 U.S. 11 1, 1 15 (19 33 ). Dedu ct io ns an d cred it s ar e a m at te r of

leg is la ti ve gra ce, an d t he tax pay er b ears th e b ur de n o f pr ov in g t ha t h e o r sh e is en ti tl edto an y de du ct io n o r cre di t cl ai m ed . Rul e 1 42 (a); Dep uty v. du P on t, 3 08 U.S. 48 8, 4 93 (19 40 ); Ne w Col on ia l Ic e Co . v. Hel ve rin g, 29 2 U.S. 4 35 , 44 0 (1 93 4)
. 5 B. Depe nd en cy

Exem pt io n Deduc ti on Inge ne ral , a tax pa y er m ay cla im a de pe nd en cy

ex em pt io n d educ ti on “ fo r each in di vi du al who is a de pe nd en t (a s d efi ne d i n s ect io n 1 52 ) of th e ta xp ay er fo r th e ta xabl e y ear.” Sec. 1 51 (a), (c ). Sect io n 1 52 (a) d efi ne s a d ep en de ntto in cl ud e a “ qu al ifyin g re lati ve .” An i nd iv idua l i s a qua li fy in g re la ti ve if anu m be r of sp eci fic requi rem en ts are s at is fie d. As rel ev an t h erei n, an in di vi du al is a qu al ifyin g re lati ve if the in di vi du al , alt ho ug h u nr el at edby blo odor m arri ag e to th e

Howev er, s ee s ec. 7 49 1( a)(1 ) whi ch , un de r certa in cir cu m st an ces no t 5 pr es en t i n t he in st an t ca se , m ay sh iftth e b ur de n o f pr oo f to th e Co m mis si on er.- 6 -

ta xp ay er, h as th e sam e p rin ci pa l p la ce o f ab od e as th e ta xp ay er an d i s a m em be r of th e ta xp ay er’s h ou se ho ldforth e ta xabl e y ear. Se e se c. 15 2( d) (2 )(H). Sect io n 1 .15 2- 1( b) , Inc om e Tax Reg s., p ro vi de s i n p ert in en t p artth at“ [t]he ta xp ay er an d d ep en de ntwil l b e co ns id eredas o ccupyin g t he ho us eh ol d fo r su ch
en ti re t ax ab le y ear n ot withs tand in g t em po rary abs en ces fro m

th e h ou se ho lddu e to sp eci al cir cu m st an ces * * * [s uc h a s] vac at io n” . Pet it io ne r co nt en ds th athe is en ti tl edto a de pe nd en cy ex em pt io n d educ ti on fo r Sh aro n R od ge rs be cau se sh e was a “ qu al ifyin g re lati ve ” in20 11 . Res po nd en t arg ue s tha t Sh aro n R od ge rs was n ota “ qu al ifyin g re la ti ve ” in 20 11 be cau se sh e al le ge dl y di d n otres id e in pe ti ti on er’s h ou se ho ldforth e en ti re t ax ab le y ear. 6 The reco rdde m on st rat es th atSh aro n R od ge rs li ve d wi th pe ti ti on er fro m Ja nu ary 20 11 th ro ug h No ve m be r 20 11 , andth e p art ie s d o n otco nt en d o th erwi se . Rathe r, th e p art ie s fo cu s the ir a tt en ti on onth e ci rcu m st an ces surro un di ng he r tra ve ls du rin g t he en d o f Decem be r 20 11 . Sharo n R od ge rs tra ve le d t o F lo rid a fo r a Ch ris tm as ho li da y

va cat io n o n o r aro un d Dec em be r 13 , 20 11 . Peti ti on er t es ti fie d th atsh e returne d fr om

he r va cat io n o n o r aro un d Dec em be r 28 , 20 11 , bu t m ov ed
ou t o f hi s h om e a few d ay s l at er. W e acc ep t p et it io ne r’s te st im on y , as we fi nditto
The re co rdest ab li sh es , andres po nd en t d oe s n otdi sp ut e, th atSh aro n 6 Ro dg ers ot he rwis e qua li fie s as a “ qu al ifyin g re la ti ve ” p ur su an t t o s ec. 1 52 (d ).- 7 -

be ho ne st , forth rig ht , andcred ib le . On th e b as is of t he reco rdas awho le , we fin d th atSh aro n R od ge rs ha d t he same pri nc ip al pl ace o f ab od e as pe ti ti on er an d was a m em be r of pe ti ti on er’s h ou se ho ldforth e en ti re t ax ab le y ear i n i ss ue . See s ec. 1.1 52 -1 (b ), In co m e Tax Reg s. Th eref or e, we ho ldth atSh aro n R od ge rs was a qu al ifyin g re lati ve for

pu rp os es of s ect io n 1 52 (d )(2 )(H). Acco rd in gl y , pet it io ne r is en ti tl edto a de pe nd en cy ex em pt io n d educ ti on with re sp ectto Sh aro n R od ge rs for20 11 . C. Earn edInc om e Tax Cred it Inth e cas e o f aneli gi bl e in di vi du al , sec ti on 32 (a)( 1) all ows anEIC. An

“ el ig ib le in di vi du al ” in cl ud es anin di vi du al who ha s a qua li fy in g c hi ldforth e ta xabl e y ear. Se e se c. 32 (c)( 1) (A)(i ). As rel ev an t h erei n, a “ qu al ifyin g c hi ld ” 7
m ean s a qua li fy in g c hi ldas d efi ne d i n s ect io n 1 52 (c). Sec . 32 (c)( 3) . An in di vi du al is a qu al ifyin g c hi ldif anu m be r of sp eci fic co nju nc ti ve requi rem en ts are s at is fie d. Se e se c. 15 2( c). Am on g t ho se requi rem en ts is th e rel at io ns hi p requi rem en t. See sec . 15 2( c)(2 ). The rel at io ns hi p re qu ire m en t i s s at is fie d i f th e in di vi du al is eit he r a ch il d o f th e ta xp ay er o r a d es cen dantof s uc h ach il d, s ec. 1 52 (c)( 2) (A), ora si bl in g o r An el ig ib le in di vi du al als o i nc lu de s an in di vi du al who do es no t h av e a 7 qu al ifyin g c hi ld . See s ec. 3 2( c)(1 )(A)(i i). Re sp on de ntco nc ed es th atpe ti ti on er i s en ti tl edto th e EIC fo r 20 11 witho uta qu al ifyin g c hi ld . See s up ra n ot e 2 .- 8 -

st ep si bl in g o f th e ta xp ay er o r a d es cen da ntof s uc h asi bl in g o r st ep si bl in g, s ec. 15 2( c)(2 )(B)
. Pet it io ne r an d Li saRo dg ers were n otm arri edin20 11 , so th atM.R. an d D.R. were n otpe ti ti on er’s s te pc hi ldreninth aty ear. Pet it io ne r cl ai m edD.R. as a qua li fy in g c hi ldon hi s t ax return fo r pu rp os es of th e EIC; ho wev er, D.R. do es no t b ear arel at io ns hi p t o p et it io ne r th atsat is fie s th e rel at io ns hi p re qu ire m en t. D.R. is no t p et it io ne r’s ch il d o r st ep ch il d, an d d oe s no t fa ll in to an y

of t he ot he r cat eg or ie s p res cri be d b y sec ti on 15 2( c)(2 ). The refo re, D.R. was no t a qua li fy in g c hi ldas d efi ne d i n s ect io n 1 52 (c) i n 2 01 1. Altho ug h n otcla im edas aqu al ifyin g c hi ldon hi s t ax return, p et it io ne r arg ue s tha t M .R. is a qu al ifyin g c hi ldforpurp os es of t he EIC. Howev er, M.R. i s no t a qua li fy in g c hi ldforth e sa m e rea so ns th atD.R. is no t a qua li fy in g c hi ld : M.R. d oe s n otbe ar a re la ti on sh ip to pe ti ti on er tha t s at is fie s the rel at io ns hi p t es t. See s ec. 1 52 (c). M.R . is no t p et it io ne r’s ch il d o r st ep ch il d, an d d oe s n otfal l i nt o an y of t he ot he r cat eg or ie s p res cri be d b y sec ti on 15 2( c)(2 ). Ther efo re, M.R. was no t a qua li fy in g c hi ldas d efi ne d i n s ect io n 1 52 (c) i n 2 01 1. Acco rd in gl y , as am at te r of law, p et it io ne r is no t en ti tl edto th e EIC wi th
res pe ctto D.R. or M .R. fo r 20 11 . See s ec. 3 2( c)(1 )(A)(i ).- 9 -

D. Chi ldTax C red itan d Ad di ti on al Ch il d Tax Cred it Sect io n 2 4( a) an d (c )(1 ) pr ov id es th ata ta xp ay er i s en ti tl edto a ch il d t ax cred itwith re sp ectto “ each qu al ifyin g c hi ld ”, as de fin edinsec ti on15 2( c), wh o ha s n otatt ai ne d a ge 17 . Sect io n 2 4( d) pro vi de s tha t a p orti on of t he cred itm ay be refu nd ab le , whi chpo rti on is co m m on ly referre d t o a s the ad di ti on al ch il d t ax cred it
. Pet it io ne r cl ai m edD.R. as a qua li fy in g c hi ldon hi s t ax return fo r pu rp os es of th e ch il d t ax cred itan d a dd it io na l ch il d t ax cred itan d a ls o a rg ue s tha t M .R. is a qu al ifyin g c hi ldforpu rp os es of s uc h c red it s. Ho wev er, as we ha ve pre vi ou sl y co nc lu de d, D.R. an d M .R. were n otpe ti ti on er’s qua li fy in g c hi ldrenas d efi ne d b y se ct io n 1 52 (c) i n 2 01 1, as ne ithe r was pe ti ti on er’s ch il d o r st ep ch il d o r ot he rwis e rel at edto hi m

withi n t he de fin it io n o f th e st atut e. It fo ll ows th at , as am atte r of law, pet it io ne r is no t en ti tl edto a ch il d t ax cred itor a n a dd it io na l ch il d t ax cred it fo r 20 11 with re sp ectto D.R. or M .R. See s ec. 2 4( c)(1 ). E. Accur acy-Rela te d P en al ty Sect io n 6 66 2( a) an d (b )(1 ) an d (2 ) im po se s an accu racy-rela te d p en al ty equa l t o 2 0% o f th e am ountof a ny un de rp aym en t o f ta x t ha t i s due to th e ta xp ay er’s n eg li ge nc e o r di sr eg ardof rul es or r eg ul at io ns or t ha t i s at tri bu tabl e to an y subs tant ia l und ers ta te m en t o f in co m e ta x. Th e te rm “ ne gl ig en ce” i nc lu de s an y- 10 -

fai lu re t o m ak e a rea so nabl e at te m ptto co m pl y with t he tax laws , and“ di sr eg ard ” in cl ud es an y

care le ss , reck le ss , or i nt en ti on al di sr eg ardof rul es or r eg ul at io ns . Sec. 6 66 2( c). By

de fin it io n, an un de rs ta te m en t i s the ex ces s o f th e ta x re qu ire d t o be sh ownon th e ta x re tu rnov er the tax actua ll y sh ownon th e return. Se c. 66 62 (d )(2 )(A). An u nd ers ta te m en t o f in co m e ta x i s “ subs tant ia l” if i t ex ceed s the gr eat er o f $5 ,00 0 o r 10 % of t he tax requi redto be sh own onth e return. Se c. 66 62 (d )(1 )(A). W ith re sp ectto a ta xp ay er’s l iabi li ty for an y pe na lty , sec ti on 74 91 (c) p la ces on th e Co m

m is si on er the bu rd enof p ro du ct io n, the reb y requi rin g t he Co m m is si on er t o c om e fo rwardwith s uf fic ie ntev id en ce i nd ic at in g t ha t i t i s ap pr op ria te to im

po se th e p en al ty. Hig be e v . Comm is si on er, 1 16 T.C. 43 8, 4 46
- 44 7 (2 00 1) . Once t he Co m m is si on er m eet s h is bu rd enof p ro du ct io n, the tax pa y er m us t co m e fo rwardwith p ers ua si ve ev id en ce tha t the Co m mis si on er’s de te rm in at io n i s i nc orrect . See Ru le 14 2( a); W el chv. Hel ve rin g, 2 90 U.S. at 1 15 . Sect io n 6 66 4( c)(1 ) pr ov id es anex cep ti onto th e im po si ti onof t he accu racyrel at edpe na lty

with re sp ectto an y

po rti on of a n u nd erp aym en t i f th e ta xp ay er es tabl is he s tha t the re was reas on ab le cau se forsu chpo rti on an d t he tax pa y er ac te d in go odfai th with re sp ectto su chpo rti on . The d eci si on as t o wh ethe r th e ta xp ay er act edwith re as on ab le cau se an d i n g oo d fa ith i s m ad e o n acas e-b y -cas e b as is ,- 11 -

ta ki ng in to acco un t the pe rti ne ntfact s an d c irc um st an ces , in cl ud in g t he tax pa y er’s kn owl ed ge , edu cat io n, an d e xp eri en ce, as well as t he tax pa y er’s rel ianc e o n pr of es si on al advi ce. Tho m as v. Co m m is si on er, T.C. Mem o. 2 01 3- 60 ; s ee al so Neo na to lo gy Asso cs ., P.A. v. Co m m is si on er, 1 15 T.C. 43 , 99 (20 00 ) (p ro vi di ng a th ree- pr on g t es t t o e st ab li sh reas on ab le rel ianc e o n p ro fes si on al advi ce), af f’d, 29 9 F.3 d 2 21 (3dCir . 20 02 ); s ec. 1 .66 64 -4 (b )(1 ), In co m e Tax Reg s. Gen eral ly, th e m os t i m po rtantfact oris th e ex te ntof t he tax pa y er’s eff ort t o a ss es s h is or h er pr op er t ax li ab il ity . Hum ph rey, Farri ng to n & McC la in , P.C. v. Co m m is si on er, T.C. Mem o. 2 01 3- 23 ; s ec. 1 .66 64 -4 (b )(1 ), In co m e Tax Reg s. Ass um in g, ar gu en do , th atres po nd en t h as m ethi s b ur de n o f pr oduc ti on in th e in st an t ca se , we ne ve rth el es s co nc lu de th atpe ti ti on er h as carr ie d h is bu rd en 8 with re sp ectto reas on ab le cau se an d g oo d fa ith. Itis cle ar fro m th e rec or d t ha t pe ti ti on er, a co ok , is no t a t ax ex pe rt o r expe rie nc edintax m at te rs . Mor eo ve r, we fin d t ha t p et it io ne r rel ie d re as on ab ly andingo odfai th on hi s co m m erci al pre pa rer, with wh om

he ha d an e st ab li sh edrel at io ns hi p o f se ve ral y ears ’ st an di ng witho ut in ci de ntan d wi th who m

he m etto ful ly dis cl os e th e in fo rm at io n n eces sary to de te rm in e h is pro pe r ta x l iabi li ty for 2 01 1. Se e Tho m as v. Co m m is si on er, T.C. Res po nd en t wi ll ha ve m ethi s b ur de n o f pr oduc ti on if R ul e 1 55 8 co m pu ta ti on s s ho w th atpe ti ti on er h ada subs tant ia l und ers ta te m en t o f in co m e ta x. See, e.g ., Jarm anv. Co m

m is si on er, T.C. Mem o. 2 01 0- 28 5.- 12 -

Mem o. 2 01 3- 60 ; s ee al so Neon at ol og y Ass oc s., P.A. v. C omm is si on er, 1 15 T.C. at 98 -9 9; Hum

ph rey, Farri ng to n & McC la in , P.C. v. Co m m is si on er, T.C. Mem o. 20 13 -2 3; sec . 1.6 66 4- 4( b) (1 ), In co m e Tax Reg s. Aft er co ns id eri ng th e to ta li ty of th e fac ts an d c irc um st an ces , we are s at is fie d t ha t p et it io ne r, who m etwith h is
co m m erci al pre pa rer t o re vi ew th e co m pl et edtax return b efo re i t was fil ed , act ed in go odfai th an d c om es withi n t he reas on ab le cau se ex cep ti on of s ect io n 66 64 (c)( 1) . See s ec. 1 .66 64 -4 (b )(1 ), In co m e Tax Reg s. Th eref or e, we ho ldth at pe ti ti on er i s n otli ab le forth e acc ur acy-rela te d p en al ty und er s ect io n 6 66 2( a). Co nc lu si on W e h av e co ns id eredall of t he arg um en ts advanc edby the parti es , and , to th e ex te ntno t ex pr es sl y

ad dr es se d, we co nc lu de th atth os e arg um en ts do no t s up po rt a res ul t co nt rary to tha t re ach edhe rei n. To g iv e eff

ectto ou r di sp os it io n o f th e d is pu te d i ss ue s, as well as res po nd en t’s co nc es si on s, s ee s up ra n ot e 2 , Deci si on wil l b e en te redun de r Ru le 15 5.