1 Unless otherwise indicated, all section references are to

the Internal Revenue Code in effect for 1998, and all Rule

references are to the Tax Court Rules of Practice and Procedure.

T.C. Summary Opinion 2001-23

UNITED STATES TAX COURT

EDWARD FALLS TRAMBLE-BEY, Petitioner v.

COMMISSIONER OF INTERNAL REVENUE, Respondent

 Docket No. 16518-99S. Filed March 7, 2001.

 Edward Falls Tramble-Bey, pro se.

 Robert J. Burbank, for respondent.

 ARMEN, Special Trial Judge: This case was heard pursuant to

the provisions of section 7463 of the Internal Revenue Code in

effect at the time the petition was filed.1 The decision to be

entered is not reviewable by any other court, and this opinion

should not be cited as authority. 
- 2 -

This matter is before the Court on the parties’ crossmotions for summary judgment. The issue for decision is whether

petitioner, an inmate at a penal institution, is entitled to an

earned income credit. As explained in greater detail below, we

shall grant respondent’s Motion for Summary Judgment and deny

petitioner's Motion for Summary Judgment.

Background

Petitioner was initially incarcerated at the Missouri

Department of Corrections in September 1997. Petitioner remained

incarcerated throughout the entire taxable year in issue, 1998,

at the Ozark Correctional Center in Fordland, Missouri. As of

the date of this opinion, petitioner remains incarcerated, and

his presumptive parole date is July 16, 2003. 

While incarcerated in 1998, petitioner participated in a

work-release program. Under the terms of the program, petitioner

was permitted to leave the Ozark Correctional Center to work, but

was required to return to the correctional center each day after

work. 

Pursuant to the work-release program, petitioner worked for

Pre-Stressed Casting Co. (Pre-Stressed Casting) in 1998. PreStressed Casting, a private-sector company, paid wages to

petitioner in 1998 in the amount of $2,197.66.

Petitioner filed a Federal income tax return, Form 1040EZ,

for 1998. On his return, petitioner reported adjusted gross
- 3 -

income in the amount of $2,223.97, consisting of wages in the

amount of $2,197.66 and taxable interest income in the amount of

$26.31. Although petitioner reported no tax liability (because

of the availability of a personal exemption and the standard

deduction), petitioner claimed an earned income credit in the

amount of $170.

After examining petitioner’s return, respondent issued a

notice of deficiency. In the notice, respondent determined that

petitioner was not entitled to an earned income credit because he

received wages while in a penal institution. Thereafter,

petitioner invoked the Court's jurisdiction by filing a timely

petition for redetermination.

Prior to trial, respondent moved for summary judgment. 

Relying on section 32(c)(2)(B)(iv) and Taylor v. Commissioner,

T.C. Memo. 1998-401, respondent contends that petitioner is not

entitled to an earned income credit because he was incarcerated

throughout the year in issue. 

Petitioner also moved for summary judgment prior to trial. 

Petitioner contends that he is entitled to the earned income

credit because Pre-Stressed Casting is a private-sector company

which paid him wages for work performed outside the Ozark

Correctional Center.
- 4 -

Discussion

 Summary judgment is intended to expedite litigation and

avoid unnecessary and expensive trials. See Florida Peach Corp.

v. Commissioner, 90 T.C. 678, 681 (1988). Summary judgment may

be granted with respect to all or any part of the legal issues in

controversy "if the pleadings, answers to interrogatories,

depositions, admissions, and any other acceptable materials,

together with the affidavits, if any, show that there is no

genuine issue as to any material fact and that a decision may be

rendered as a matter of law." Rule 121(b); Sundstrand Corp. v.

Commissioner, 98 T.C. 518, 520 (1992), affd. 17 F.3d 965 (7th

Cir. 1994); Zaentz v. Commissioner, 90 T.C. 753, 754 (1988);

Naftel v. Commissioner, 85 T.C. 527, 529 (1985). The moving

party bears the burden of proving that there is no genuine issue

of material fact, and factual inferences will be read in a manner

most favorable to the party opposing summary judgment. See 

Dahlstrom v. Commissioner, 85 T.C. 812, 821 (1985); Jacklin v.

Commissioner, 79 T.C. 340, 344 (1982). 

We turn now to the substantive issue that the parties’

cross-motions present.

An eligible individual is allowed an earned income credit

for the taxable year in an amount equal to the credit percentage

of so much of the taxpayer’s earned income as does not exceed the

earned income amount. See sec. 32(a)(1). Earned income includes
- 5 -

wages, salaries, tips, and other employee compensation. See sec.

32(c)(2)(A)(i). However, earned income does not include any

amount received for services provided by an individual while the

individual is an inmate at a penal institution. See sec.

32(c)(2)(B)(iv). 

Respondent contends that section 32(c)(2)(B)(iv) is

dispositive of the issue before us. Petitioner contends that

section 32(c)(2)(B)(iv) does not apply because his wages were

paid by a private-sector company for services rendered outside of

the Ozark Correctional Center. We agree with respondent and

disagree with petitioner.

Petitioner misconstrues section 32(c)(2)(B)(iv). Under that

section, the status of the payor (i.e., public or private entity)

is irrelevant; likewise, the situs where the services are

performed (i.e., inside or outside the prison walls) is

irrelevant. Rather, what is relevant is whether a taxpayer

provides services while the taxpayer is incarcerated. See Taylor

v. Commissioner, T.C. Memo. 1998-401; cf. Lucas v. Commissioner,

T.C. Memo. 1999-321. A taxpayer is incarcerated even when the

taxpayer is outside the prison walls pursuant to a work-release

program. In other words, a taxpayer is incarcerated for the

entire period of the taxpayer’s prison sentence or until paroled.

The legislative history of section 32(c)(2)(B)(iv) reveals

that (1) Congress designed the earned income credit to alleviate
- 6 -

poverty and to provide work incentives to low-income individuals

and that (2) Congress determined that these objectives would not

be furthered if amounts paid for inmates’ services were included

in the definition of earned income. See H. Rept. 103-826 (Vol.

I) (1994); S. Rept. 103-412 (1994); see Sutherland v.

Commissioner, T.C. Memo. 2001-8. Accordingly, Congress enacted

section 32(c)(2)(B)(iv) to exclude from the definition of earned

income any amount received for services provided by an individual

while the individual is an inmate at a penal institution. See

id.

Reviewed and adopted as the report of the Small Tax Case

Division.

Conclusion

In order to give effect to the foregoing, 

 An order and order and decision

will be entered (1) denying petitioner's

Motion for Summary Judgment, (2) granting respondent’s Motion for Summary

Judgment, and (3) entering decision for 

respondent.