T.C. Summary Opinion 2010-11

UNITED STATES TAX COURT

RUBEN ROBERTO FLORES, Petitioner v.

COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 7507-08S. Filed January 27, 2010.

Ruben Roberto Flores, pro se.

Deborah Mackay, for respondent.

GOLDBERG, 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. Pursuant to section

7463(b), the decision to be entered is not reviewable by any

other court, and this opinion shall not be treated as precedent

for any other case. Unless otherwise indicated, subsequent

section references are to the Internal Revenue Code in 
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1The Court redacts the names of minor children. See Rule

27(a)(3).

effect for the year in issue, and all Rule references are to the

Tax Court Rules of Practice and Procedure.

Respondent determined a deficiency of $5,046 in petitioner’s

2005 Federal income tax. The issues for decision are whether

petitioner is entitled to: (1) Dependency exemption deductions

for two of his children; (2) head of household filing status; (3)

the refundable portion of the child tax credit; and (4) an earned

income credit.

Background

Some of the facts have been stipulated and are so found. 

The stipulation of facts and the attached exhibits are

incorporated herein by this reference. At the time petitioner

filed his petition, he resided in Illinois.

Petitioner has a son, R.F.,1 from a relationship with Lisa

Cervantes (Ms. Cervantes). R.F. reached age 4 in 2005. 

Petitioner also has a daughter, Dulce Flores (Ms. Flores), from a

relationship with Rosa Gonzalez (Ms. Gonzalez). Ms. Flores

reached age 18 in 2005. In the fall of 2005 Ms. Flores entered

her senior year of high school. Petitioner did not marry Ms.

Gonzales or Ms. Cervantes. 

From January 2005 through March 2005 petitioner and his two

children, Ms. Flores and R.F., lived with petitioner’s sister in
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her residence. During these 3 months petitioner was unemployed

and had full-time custody of R.F. and Ms. Flores. Petitioner was

receiving unemployment benefits and used the benefits to support

his children and himself.

Upon securing employment with a contract landscaper for the

City of Chicago, petitioner entered into a lease agreement

effective April 1, 2005, for a one-bedroom apartment. The

agreement listed petitioner, Ms. Flores, and R.F. as occupants,

required a security deposit of $475, and provided for monthly

rent of $475.

In April 2005, because petitioner was working during the

weekdays, R.F. began living with Ms. Cervantes. At that time Ms.

Cervantes was unemployed and was receiving welfare benefits and

government-subsidized housing. In addition, Ms. Cervantes

received child support payments of approximately $50 per week

from petitioner, which were automatically withheld from his

unemployment benefits and from his salary when employed. Even

though Ms. Cervantes had physical custody of R.F. during the

weekdays, R.F. would stay with petitioner during the weekends. 

Once petitioner’s employment ended in October, R.F. resumed

living with petitioner full time.

In contrast, Ms. Flores lived with petitioner throughout the

year. Petitioner paid for Ms. Flores’ housing, food, clothing,

transportation to and from school, and other necessities. The
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Court received into evidence a notarized statement from Ms.

Gonzalez stating that Ms. Flores lived with petitioner throughout

2005. Respondent conceded that petitioner had primary custody of

Ms. Flores for 2005. On occasion Ms. Gonzalez would take Ms.

Flores shopping and would give her nominal spending money.

During the summer Ms. Flores secured a job working part time

as a teller or teller-in-training at a local bank. In the fall

she continued working at the bank on an even more abbreviated

schedule after classes. Ms. Flores’ earnings were not large, and

petitioner encouraged her to save what she earned. Ms. Flores

used her savings to help pay for college, which she began in

2006, studying to become a nurse.

Petitioner did not keep records of the actual expenses he

paid to maintain his household. During the preparation of the

case for trial, in response to respondent’s request, petitioner

submitted a “Worksheet to Determine Support and Cost of

Maintaining a Household 2005” dated September 17, 2008, detailing

his household expenses for 2005. Respondent did not challenge

the accuracy of the worksheet, which showed the following

household expenses:
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Rent

Utilities

Telephone

Food

Clothing

Entertainment

Transportation

Other

 Total

$4,975

 540

 590

 1,400

 1,200

 600

 1,200

 360

10,865

Petitioner calculated on the worksheet that the above

expenses totaled $11,535. Nothing in the record explains the

difference of $670 ($11,535 - $10,865). Petitioner also wrote on

the worksheet that other persons paid $300 of the $360 in other

household expenses. Thus, petitioner paid total expenses of

$10,565 ($10,865 - $300) during 2005 to maintain a household for

himself and his two children. 

Petitioner has another, older, daughter, Vanessa Rivera,

living independently and not involved here, who prepared

petitioner’s 2005 Federal income tax return. Petitioner filed

his 2005 return as head of household, reported total income of

$12,735, and claimed two dependency exemption deductions, an

earned income credit, and an additional child tax credit, which

is the refundable portion of the child tax credit. The result

was an overpayment of $4,146, for which petitioner requested

direct deposit of the refund into his checking account.

Petitioner reported two items of income on his 2005 Federal

income tax return: Wages of $8,735 and business income of

$4,000. The wages are not at issue. However, with respect to
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the business income, petitioner attached to the return a Schedule

C-EZ, Net Profit From Business, reporting that his business was

daycare and listing his sister’s address as his business address. 

Petitioner reported receipts of $4,000, no expenses, and selfemployment tax of $565 related to the business. Nothing in the

record shows that petitioner was in the daycare business. We

infer that the $4,000 is actually petitioner’s unemployment

income that he did not report elsewhere on the return.

Respondent issued a notice of deficiency changing

petitioner’s filing status to single and disallowing the

dependency exemption deductions, the earned income credit, and

the additional child tax credit.

Discussion

In general, the Commissioner’s determination set forth in a

notice of deficiency is presumed correct, and the taxpayer bears

the burden of showing that the determination is in error. Rule

142(a)(1); Welch v. Helvering, 290 U.S. 111, 115 (1933). 

Pursuant to section 7491(a), the burden of proof as to factual

matters shifts to the Commissioner under certain circumstances. 

Petitioner has neither alleged that section 7491(a) applies nor

established his compliance with its requirements. Therefore,

petitioner bears the burden of proof.

Deductions are a matter of legislative grace, and the

taxpayer bears the burden of proving his entitlement to a
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deduction. Rule 142(a)(1); INDOPCO, Inc. v. Commissioner, 503

U.S. 79, 84 (1992); New Colonial Ice Co. v. Helvering, 292 U.S.

435, 440 (1934). A taxpayer is required to maintain records

sufficient to establish the amounts of his or her income and

deductions. Sec. 6001; sec. 1.6001-1(a), (e), Income Tax Regs.

With respect to support, the law does not require a taxpayer

to provide precise amounts, but the taxpayer must provide

competent, convincing, or credible evidence to prove the total

amount of support for each dependent. Blanco v. Commissioner, 56

T.C. 512, 514 (1971); Seraydar v. Commissioner, 50 T.C. 756, 760

(1968). Credible evidence means evidence that a court would find

sufficient to make a decision if the record did not contain

contrary evidence and if the evidence did not include implausible

factual assertions or frivolous claims; thus, the evidence must

be worthy of the Court’s belief. Higbee v. Commissioner, 116

T.C. 438, 442 (2001).

I. Dependency Exemption Deductions

A taxpayer may be entitled to a dependency exemption

deduction for each of his or her dependents. Sec. 151(a), (c). 

A dependent includes a “qualifying child” of the taxpayer. Sec.

152(a). In relevant part a qualifying child is an individual:

(1) Who bears a relationship to the taxpayer as described in

section 152(c)(2); (2) who has the same principal place of abode

as the taxpayer for more than one-half of the year; (3) who meets

the age requirements described in section 152(c)(3) specifying an
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individual under the age of 19; and (4) who has not provided over

one-half of his or her own support for the year. Sec. 152(c)(1). 

We now apply the law to the facts to decide whether R.F. and Ms.

Flores are petitioner’s qualifying children for 2005.

A. Whether R.F. Is a Qualifying Child

R.F. is petitioner’s son, he reached age 4 in 2005, and

because of his age, he clearly did not provide more than one-half

(or any) of his own support. Therefore, the sole remaining

question with respect to R.F. is whether he shared the same

principal place of abode as petitioner for more than one-half of

2005. 

Regarding this matter, we find petitioner’s testimony highly

credible. He offered to have his son testify (which the Court

declined because of the boy’s young age) that for 6 months of

2005 (the first 3 months and the final 3 months), while

petitioner was at home and unemployed, R.F. lived with

petitioner. During the other 6 months, April through October

2005, while petitioner was working as a landscaper, R.F. lived

with Ms. Cervantes during the weekdays and with petitioner during

the weekends. Thus, in aggregate, R.F. resided with petitioner

full time for 6 months, and for 2 days of every week during the

other 6 months. Hence, R.F. resided with petitioner for more

than one-half of the year.

For the foregoing reasons, R.F. satisfies the requirements

of section 152(c) to be petitioner’s qualifying child for 2005,
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and therefore petitioner is entitled to a dependency exemption

deduction for R.F.

B. Whether Ms. Flores Is a Qualifying Child

Ms. Flores is petitioner’s daughter, she became age 18 in

2005 and was therefore under age 19 at the close of the year, and

she resided with petitioner for more than one-half (namely all)

of 2005 as confirmed by the notarized letter from her mother, Ms.

Gonzalez, and as conceded by respondent. The sole remaining

issue then is whether because of her alleged earnings from her

job at the bank Ms. Flores provided more than one-half of her own

support. See sec. 152(c)(1)(D). We will now therefore apply the

support test to Ms. Flores’ situation.

With respect to the amount that Ms. Flores spent for her own

support in 2005, we begin by noting that the record does not

establish the amount Ms. Flores earned from her job at the bank

or the amount she spent for her own support in 2005. Petitioner

acknowledged that Ms. Flores worked for the bank; however, he

also testified that he provided almost all of Ms. Flores’ support

for 2005 and that he encouraged her to save her earnings. We

find petitioner’s testimony credible.

Ms. Flores’ situation bolsters petitioner’s testimony. Ms.

Flores was a senior in high school and needed to save money for

college, which she began in 2006. She worked for a bank, making

it convenient for her to save her wages. Petitioner paid for Ms.

Flores’ main needs: Housing, utilities, food, clothing,
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entertainment, and transportation to and from school. Ms.

Gonzalez also provided her some minimal support, occasionally

taking her shopping and giving her some spending money.

Respondent has not offered any evidence to refute

petitioner’s testimony. Respondent in his pretrial memorandum

stated that Ms. Flores filed a 2005 Federal income tax return

reporting wages of $4,374. Respondent later at trial conceded

that Ms. Flores did not file a 2005 Federal income tax return. 

Respondent did not provide a transcript of account for Ms. Flores

and did not produce a copy of a 2005 Form W-2, Wage and Tax

Statement, for Ms. Flores from the bank where she worked during

2005.

Therefore, petitioner has met his burden, and respondent has

not proved or even attempted to prove otherwise. Accordingly,

the weight of the evidence clearly favors petitioner’s contention

that Ms. Flores did not provide over one-half of her own support

for 2005.

Consequently, because Ms. Flores meets all of the relevant

requirements of a qualifying child under section 152(c),

petitioner is entitled to claim her as a dependent for 2005.

II. Filing Status

As pertinent here, head of household filing status requires

that the taxpayer maintain a home that was the principal place of

abode of a qualifying child for more than one-half of the year. 

Sec. 2(b)(1)(A). Additionally, head of household filing status
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is available only if the taxpayer furnished more than one-half of

the cost of maintaining that residence. Sec. 2(b).

Applying these requirements, we have already found that Ms.

Flores was petitioner’s qualifying child for 2005, she lived in

petitioner’s apartment for 9 months (April through December

2005), and petitioner furnished far more than one-half of the

cost of maintaining his household. Therefore, petitioner is

entitled to head of household filing status for 2005.

III. Refundable Child Tax Credit

Subject to adjusted gross income ceilings, not at issue

here, a taxpayer is entitled to a $1,000 credit against tax for

each qualifying child of the taxpayer. Sec. 24(a). For purposes

of this section, a qualifying child means an individual under age

17 who is a qualifying child of the taxpayer as defined in

section 152(c). Sec. 24(c)(1). The age restriction disqualifies

Ms. Flores. However, R.F. was age 4 in 2005 and satisfies the

other requirements of a qualifying child under section 152(c). 

Generally, a taxpayer may not claim the child tax credit if

the taxpayer does not have a “regular tax liability”. Sec.

24(b)(3)(A); Richmond v. Commissioner, T.C. Memo. 2009-207. 

Petitioner’s regular tax liability for 2005 was zero because his

income was less than the combination of his standard deduction

plus his deduction for three exemptions (himself and his two

qualifying children).
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Despite the above restriction, a separate provision allows a

taxpayer to receive a refund of a portion of the child tax credit

equaling 15 percent of the taxpayer’s earned income that exceeds

a certain floor. Sec. 24(d) (referring to section 32 for the

definition of earned income). For 2005, the inflation adjusted

floor was $11,000. Rev. Proc. 2004-71, sec. 3.04, 2004-2 C.B.

970, 972.

Petitioner’s earned income in 2005 was solely from his wages

of $8,735 because unemployment compensation, $4,000 in this case,

is not earned income. See sec. 1.32-2(c)(2), Income Tax Regs. 

Accordingly, although petitioner did have one qualifying child,

R.F., that satisfied the requirements of the child tax credit,

petitioner did not have a regular tax liability to make him

eligible for the credit and he did not have sufficient earned

income to make him eligible for any part of the refundable

portion of the child care tax credit. We sustain respondent on

this issue.

IV. Earned Income Credit

Individuals may be eligible for an earned income credit,

calculated as a percentage of earned income, if they meet certain

criteria. Sec. 32(a)(1). For purposes of qualifying for the

earned income credit, an “eligible individual” is an individual

who has a “qualifying child” for the taxable year. Sec.

32(c)(1)(A). In pertinent part, a “qualifying child” is a child
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of the taxpayer that satisfies the requirements of section

152(c). Sec. 32(c)(3). As discussed above, Ms. Flores and R.F.

are petitioner’s qualifying children for 2005 under section

152(c). Therefore, petitioner is entitled to an earned income

credit for 2005 calculated with two qualifying children. 

However, for purposes of the earned income credit, petitioner’s

earned income for 2005 was $8,735, not the $12,735 he reported,

because $4,000 of petitioner’s income was from unemployment

compensation, which is not earned income. See Jones v.

Commissioner, T.C. Memo. 1993-358; sec. 1.32-2(c)(2), Income Tax

Regs.

To reflect our disposition of the issues,

Decision will be entered

under Rule 155.