TAX COURT OPINION

Case: Jerry Lee Butcher & Veronica Kwete
Docket Number: 8308-16S
Judge: Goeke
Opinion Type: bench
Filed: 04/05/2018
Pages: 9

UNITED STATES TAX COURT WASHINGTON, DC 20217 JERRY LEE BUTCHER & VERONICA KWETE, ) ) Petitioner(s), v. COMMISSIONER OF INTERNAL REVENUE, Respondent ) ) ) Docket No. 8308-16S. ) ) ) ) ORDER Pursuant to Rule 152(b), Tax Court Rules of Practice and Procedure, it is ORDERED that the Clerk of the Court shall transmit herewith to petitioners and to respondent a copy of the pages of the transcript of the trial in the above case before Judge Joseph Robert Goeke at San Antonio, Texas containing his oral findings of fact and opinion rendered at the trial session at which this case was heard. In accordance with the oral findings of fact and opinion, a decision will be entered uhder Rule 155. (Signed) Joseph Robert Goeke Judge Dated: Washington, D.C. April 5, 2018 SERVED APR - 6 2018 Bench Opinion by Judge Joseph Robert Goeke March 23, 2018 Jerry Lee Butcher & Veronica Kwete v. Commissioner of 3 Internal Revenue Docket No. 8308-16S The Court has decided to render oral findings of fact and opinion in this case. And the following represents the Court's oral findings of fact and opinion. The oral findings of fact and opinion shall not be relied 1 2 3 4 5 6 7 8 9 10 upon as precedent in any other case. 11 This case was heard pursuant to the provisions 12 of Internal Revenue Code Section 7463 in effect when the 13 petition was filed. Pursuant to Section 7463(b) the 14 decision to be entered is not reviewable by any other 15 court. 16 17 18 This opinion is rendered pursuant to Section 7459(b) of the Internal Revenue Code. And section references throughout this opinion are to the Internal 19 Revenue Code. 20 21 22 This opinion is also authorized by Rule 152 of the Tax Court Rules of Practice and Procedure and rule references are to the Tax Court Rules of Practice and 23 Procedure. 24 25 This is a deficiency case and the petitioners timely filed a petition for review of the notice of (973)406-2250|operationseescribers.net|www.escribers.net 4 deficiency which was issued to them after they had jointly filed an income tax return for the year 2013. Respondent, in that notice of deficiency determined a deficiency in the amount of $6,340 and an addition to tax under Section 6662(a) in the amount of $1,268. The petitioners resided in Texas when they filed their petition challenging the IRS determination of the deficiency and the addition to tax. After concessions by the IRS the issue before us is whether the petitioners are entitled to a dependency exemption for Mr. Butcher's minor child by a previous 2 3 4 5 6 7 8 9 10 11 12 marriage. Some of the facts have been stipulated and Mr. 13 Butcher testified at trial. The trial was held on Monday, 14 March 19th, 2018 in San Antonio, Texas. 15 16 17 18 The child was born in 1998. For the 2013 taxable year the child's mother also claimed the child as a dependent. She is the custodial parent of the child, and that is not in dispute. The case turns on whether 19 Paragraph K of the joint child custody plan, which was 20 filed in Oklahoma District Court, and executed by Mr. 21 Butcher and the child's mother, provides an exception to 22 23 the normal rule that allows the dependent of the custodial parent to be claimed by the custodial parent and not the 24 other parent. 25 Paragraph 7K of the joint child custody plan (973)406-2250loperationseescribersnet|www.escribersmet 5 1 2 3 4 5 6 7 8 9 provides as follows: The State and Federal Income Tax Dependent Exemptions for the minor child shall be awarded to the parties as follows: During even numbered tax years, (e.g. 2006) petitioner shall always receive the Federal and State exemptions for the minor child. Petitioner is defined in the agreement as Mr. Butcher's former spouse. During odd numbered tax years (e.g. 2007) respondent, who is defined in the agreement to be Mr. 10 Butcher, shall receive such exemptions conditioned upon 11 12 13 14 15 16 respondent having paid, by December 31st of the applicable tax year of respondent's year of entitlement, all accrued child support obligations of such year and of all prior years. If said condition not be satisfied by that date, this award shall be forfeited for that particular tax year and said exemption shall belong to petitioner, Mrs. 17 Butcher. If said condition be satisfied, Mrs. Butcher 18 shall execute and deliver to Mr. Butcher all such Federal 19 and State Income Tax forms as are then utilized by such 20 21 22 taxing authorities which authorize Mr. Butcher to receive such exemptions for the year involved. Mr. Butcher testified that he was current on his 23 obligations and that the Federal Government withheld from 24 his military pension the child support which he was 25 required to pay h the child he had with his former EM (973)406-2250|operationsgescribersnetlwww.escribersnet 6 spouse. 2 3 4 5 6 7 8 9 We note that the joint child custody plan, which was filed in the district court in the State of Oklahoma in 2008 has other provisions requiring support in addition to subparagraph K. These provisions include Mr. Butcher's obligation to provide medical insurance and to share expenses for certain other activities of the child and to pay certain travel expenses of the child. There was no evidence offered as to whether Mr. Butcher was current on 10 these obligations other than his generic testimony that he 11 was up to date on all of the obligations. 12 13 Seçtion 152(e) provides the scheme for the determination of who is entitled to the dependent for Mr. 14 Butcher's child by his former spouse. Th±s specific 15 provision, which is applicable to this case is Section 16 152(e)(2), which provides an exception from the general 17 rule that the custodial parent is entitled to claim the 18 19 exemption in situations described in that subsection. Subsection (2) (A) provides that where the 20 custodial parent signs a written declaration in the manner 21 and form provided by the secretary that such custodial 22 parent shall not claim such child as a dependent for any 23 24 taxable year beginning in such calendar year. It also requires in subsection (b) that the non-custodial parent 25 attach such written declaration to the Income Tax Return (973)406-2250|operationseescribesmet|www.escibersnet 7 for the year in question. Mr. Butcher's former spouse declined to sign form 8332 which is the standard form provided by the secretary. He nevertheless argues that the joint child custody plan filed with the Oklahoma District Court is sufficient to support his claim for the dependency exception as a substile for the form 8332. The form requires that a taxpayer furnish the name of the child, the social security number of the non-custodial parent claiming the dependency exception deduction, the social security number of the custodial parent, the signature of the custodial parent, the date of the custodial parent's signature and the years that are the subject of the release. Reading the joint agreement filed in Oklahoma 2 3 4 5 6 7 8 9 10 11 12 13 14 15 District Court in the most favorable light to Mr. Butcher, 16 17 18 19 20 21 there are certain omissions; the social security numbers in particular. However, respondent also argues that based upon the treasury regulations and the case law, the substitute for form 8332 cannot be conditioned upon any obligations in order to be effective. Respondent cites Treas. Regs. 22 Section 1.152-4(e)(1)(i) and (ii). In Swin v. 23 Commissioner, 142 T.C. 131 (2014) this court upheld the 24 25 rule that a declaration must be unconditional. We have found that the regulations requirement of such a lack of BM p73)406-22soloperationseescribers.netlwww.escribers.net 8 1 2 3 4 5 6 7 8 9 condition is consistent with the statutory mandate and we have upheld the regulation. Mr. Butcher would argue that the condition is irrelevant because his payments are taken directly from his pension. But he does overlook the other conditions in the joint child custody plan that we noted previously. We have no way of knowing whether Mr. Butcher's former spouse was concerned that he was remiss with respect to any of these other obligations, but we would 10 note that Mr. Butcher's remedy in this situation is not 11 with this court. And that the Congress of the United 12 States and the Internal Revenue Service, and the 13 14 regulations have provided a scheme to definitively define who receives the dependency exemption without the 15 necessity for Federal Courts to determine the application 16 of State law. 17 In the present case to find for Mr. Butcher, we 18 would have to enforce the joint child custody plan; which 19 was adopted as an order by the Oklahoma State Court. We 20 would have to do this without complete knowledge of 21 whether all the conditions were met. And we would have to 22 23 24 do this by, in effect, ordering Mr. Butcher's former spouse to file the appropriate form, because she was required to do so based upon the joint child custody plan. 25 Or in lieu of her filing the appropriate form, we would $73)406-2250|operat ns@escribersnet|wwwascribers.net 9 simply say we would discern the form should be substituted by the joint child custody plan. We believe this is inconsistent with Federal Law and that Mr. Butcher's remedy is to seek relief in the State Court should his wife continue to refuse to file or provide to him the form 8332, which is required. We believe our holding is consistent with various cases in our court that have construed these type of situations, such as Miller v. Commissioner, 114 T.C. 184 (2000) and Swin, previously cited. We now consider the addition to tax. It is not clear that the Internal Revenue Service has conceded the 1 2 3 4 5 6 7 8 9 10 11 12 13 addition to tax, but we find that petitioners have 14 15 16 17 reasonable cause in the present case for not correctly filing their return in the context of the dependents exemption, which remains in dispute. This reasonable cause is because, as Mr. Butcher 18 points out, he was entitled to the dependent based upon 19 his reading of the joint child custody plan filed in the 20 district court in Oklahoma. And that these provisions are 21 22 23 24 25 rather complex. Given these circumstances, we find he had a good faith failure to properly file his return and we do not uphold the addition to tax under 6662(a). This case will require a Rule 155 computation to implement respondent's settlement of other issues, and the (973)406-2250loperations@escribersnet|www.escribers.net 10 concession of some other dependency exemptions which were disallowed in the notice of deficiency. Mr. and Mrs. Butcher are directed to review the 155 computation prepared by respondent, which will be forwarded to them. And to execute the appropriate decision document, if they agree with that computation. Or to file their own version of the correct computation, if they disagree with respondent's computation. We direct that these activities all take place 2 3 4 5 6 7 8 9 10 on or before June 15th, 2018, and that if in fact a 11 decision document cannot be filed by that date, that the 12 parties file a status report by that date indicating their progress in preparing a decision pursuant to Rule 155. This concludes the Court's oral findings of fact and opinion in this case. (Whereupon, at 10:53 a.m., the above-entitled matter was concluded.) 13 14 15 16 17 18 19 20 21 22 23 24 25 cribers niis (973)406-2250|operations@escrbersmet|www scribersnet