TAX COURT OPINION

Case: Lejeun A. Clark, Sr.
Docket Number: 16376-16
Judge: Kerrigan
Opinion Type: bench
Filed: 11/09/2017
Pages: 9

SEC UNITED STATES TAX COURT WASHINGTON, DC 20217 LEJEUN A. CLARK, SR., Petitioner(s), v. COMMISSIONER OF INTERNAL REVENUE, Respondent 16376-16. ) ) ) ) ) Docket No. ) ) ) ) ) ORD E R 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 petitioner and to respondent a copy of the pages of the transcript of the trial in the above case before Judge Kathleen Kerrigan at San Francisco, California on October 25, 2017, containing her oral findings of fact and opinion rendered at the conclusion of the trial session at which this case was heard. In accordance with the oral findings of fact and opinion, a decision will be entered under Rule 155, Tax Court Rules of Practice and Procedure. (Signed) Kathleen Kerrigan Judge Dated: Washington, D.C. November 9, 2017 SERVED Nov 13 2017 3 1 2 3 4 5 6 7 8 9 Bench Opinion by Judge Kathleen Kerrigan October 25, 2017 Lejeun A. Clark, Sr. v. Commissioner Docket No. 16376-16 THE COURT: The Court has decided to render in this case the following as its oral Findings of Facts and Opinion, which shall not be relied upon as precedent in any other case. This Bench Opinion is made pursuant to the authority granted by section 7459(b) of the Internal 10 Revenue Code and Rule 152 of the Tax Court Rules of 11 Practice and Procedure. Unless otherwise indicated, all 12 section references are to the Internal Revenue Code in 13 effect for the tax year in issue, and all Rule references 14 15 are to the Tax Court Rules of Practice and Procedure. By notice of deficiency dated April 25, 2016, 16 respondent determined a deficiency of $7,413 for tax year 17 18 2014. Respondent disallowed deductions that petitioner claimed for dependency exemptions for three children, the 19 child tax credit, the earned income tax credit, and head 20 of household filing status. Respondent now concedes that 21 petitioner is entitled to the dependency exemption for one 22 23 of the minor children for tax year 2014. We assume that respondent's concession allows that child to be treated as 24 petitioner's qualifying child for purposes of the child 25 tax credit and earned income credit. (973)406-2250joperationsøescribersmet|www.escríbersnet 4 Trial in this case was conducted in San Francisco, California, on October 24, 2017. Petitioner represented himself. Respondent was represented by Sandeep Singh. The parties' Stipulation of Facts was admitted into evidence along with the attached exhibits. We find the following facts: Findings Petitioner resided in California when he timely filed his petition. Petitioner timely filed his 2014 Form 1 2 3 4 5 6 7 8 9 10 1040, U.S. Individual Income Tax Return, as head of 11 household. A Form 8332, Release/Revocation of Release of 12 Claim to Exemption for Child by Custodial Parent, was not 13 attached to petitioner's 2014 tax return. Petitioner has 14 three children, and they were all minors during 2014. 15 Petitioner claimed the children as dependents on his tax 16 return. Petitioner's marriage was dissolved pursuant to 17 "Notice of Entry of Judgment" (notice) issued bp the 18 Alameda County Superior Court, which granted petitioner a 19 divorce from his former wife. The divorce was effective 20 on August 11, 2014. 21 The notice did not award either parent custody 22 of the three children. At the time of the notice, 23 petitioner, his former wife, and their three children were 24 living with the children's maternal grandmother. 25 Petitioner and his former wife were no longer able to (973) 406-2250l operations@escribers.net j www.escribersnet 1 2 3 4 5 6 7 8 9 10 11 12 afford their own residence and had moved in with the children's maternal grandmother. At some point in 2014, the maternal grandmother was granted temporary custody of the children. For one of the children, the maternal grandmother was listed as the guardian for the 2013-2014 school year. Petitioner earned income of approximately $12,700 in 2014, and he spent approximately $5,000 on the care of his children. Petitioner, his former wife, and the children lived with the maternal grandmother during 2014, and petitioner moved out in the fall of 2014. Petitioner's former wife signed a Form 8332 on 13 March 2, 2016. The Form 8332 only released her claim to 14 the exemption for one of the children. On the form, 15 petitioner's former wife released her claim to the 16 exemption for tax year 2014 and future tax years 2015- 2018. 17 18 19 Opinion Generally, the Commissioner's determinations are 20 presumed correct, and the taxpayer bears the burden of 21 proving that those determinations are erroneous. Rule 22 142(a); Welch v. Helvering, 290 U.S. 111, 115 (1933). 23 Deductions and credits are a matter of legislative grace, 24 and the taxpayer bears the burden of proving that he or 25 she is entitled to any deduction or credit claimed. Rule BElliliB (973)406-2250|operationseescribers.net|www.escribers.net . 6 1 2 3 4 5 6 7 8 9 10 11 142(a); Deputy v. du Pont, 308 U.S. 488, 493 (1940); New Colonial Ice Co. v. Helvering, 292 U.S. 435, 440 (1934). Under section 7491(a)(1), the burden of proof may shift from the taxpayers to the Commissioner if the taxpayer produces credible evidence with respect to any factual issue relevant to ascertaining the taxpayer's liability. Petitioners do not argue or provide evidence that the conditions of section 7491(a) are fully satisfied; therefore, the burden of proof remains on petitioners. An individual taxpayer is allowed as a deduction an exemption for "each individual who is a dependent (as 12 defined in section 152) of the taxpayer for the taxable 13 year." Sec. 151(c). Section 152(a) defines the term 14 15 16 17 18 19 "dependent" to include a "qualifying child". Generally, a "qualifying child" must: (i) bear a specified relationship to the taxpayer, (ii) have the same principal place of abode as the taxpayer for more than one-half of such taxable year, (iii) meet certain age requirements, and (iv) not have provided over one-half of such individual's 20 own support for the taxable year at issue. Sec. 21 22 152(c)(1). The specified relationship includes a child of the taxpayer or a descendant of such child. See sec. 23 152(c)(2). 24 Section 152(e)(1) provides a special rule for 25 divorced or legally separated parents, which permits a (973)406-2250|operationseescribersmet|www.escribers.net noncustodial parent, under certain circumstances, to claim 7 a dependency exemption deduction for a child. See sec. 152(e); Espinoza v. Commissioner, T.C. Memo. 2011-108; sec. 1.152-4T(a), Q&A-2, Temporary Income Tax Regs., 49 Fed. Reg. 34459 (Aug. 31, 1984). As relevant to this case, section 152(e)(2) allows the noncustodial parent to claim a dependency exemption deduction for a child if: (A) the custodial parent signs a written 1 2 3 4 5 6 7 8 9 10 declaration (in such a manner and form as the Secretary 11 may by regulations prescribe) that such custodial parent 12 will not claim such child as a dependent for any taxable 13 14 year beginning in such calendar year, and (B) the noncustodial parent attaches such 15 written declaration to the noncustodial parent's return 16 17 for the taxable year beginning during such calendar year. Based on the evidence in the record, petitioner 18 has not shown that he is the custodial parent. The notice 19 did not grant custody to petitioner. To be entitled to 20 21 22 23 the dependency exemptions, petitioner must show that for tax year 2014 he satisfied the requirements of section 152(e)(2). The declaration required by section 152(e)(2) 24 must be made on either Form 8332 or on a statement 25 conforming to the substance of that form. See Sec. 1.152- (973)406-2250|operations@escribers.net|www.escnbers.net 8 1 2 3 4 5 6 7 8 9 4T(a), Q&A-3, Temporary Income Tax Regs.; Armstrong v. Commissioner, 139 T.C. 468, 472 (2012), aff'd, 745 F.3d 890 (8th Cir. 2014). The special rule of section 152(e)(1) does not apply because.no Form 8332 or statement conforming to the substance of that form was filed by petitioner with his 2014 tax return. The Form 8332 dated March 2, 2016, only released the claim to the exemption for one child, and the respondent has now allowed petitioner to claim the dependency exemption for one child 10 for tax year 2014. Because petitioner was not the 11 custodial parent, he is not able to claim a dependency 12 13 14 15 16 17 exemption deduction for his other two children. Section 1(b) provides a special tax rate for an individual who qualifies as a head of household. Section 2(b) provides the requirements for head of household filing status. In order to qualify as a head of a household, petitioner must have been unmarried at the end 18 of 2014 and maintained a household that was the principal 19 place of abode for at least one dependent for more than 20 one-half of the taxable year. See sec. 2(b)(1) (A). 21 Petitioner was not married at the end of 2014, but he does 22 not satisfy the requirements of section 2(b) because he 23 did not show that he maintained a household that was the 24 principal place of abode for at least one dependent. 25 Petitioner is not entitled to the head of household } BEEiB (973)406-2250|operations@escribersnet|wwwmscribers.net 1 2 3 4 5 6 7 8 9 status. Our conclusion as to petitioner's entitlement to dependency exemption deductions for the other two children, in effect, resolves the issues of his entitlement to the child tax credit and earned income credit that he claimed for those children. Section 24(a) provides a credit that a taxpayer may claim with respect to each "qualifying child" of the taxpayer. Section 24(c)(1) defines the term "qualifying 10 child" as "a qualifying child of the taxpayer (as defined 11 in' section 152(c)) who has not attained the age 17." 12 Where a taxpayer is eligible for the child tax credit, but 13 the taxpayer's regular tax liability is less than the 14 15 amount of the child tax credit potentially available under section 24(a), and section 24(d) makes a portion of the 16 credit, known as the additional child tax credit, 17 refundable. 18 19 Because neither of the other two children meet the definition of qualifying child with respect to 20 petitioner for purposes of section 152, neither child may 21 be treated as petitioner's qualifying child for purposes 22 of the child tax credit. Petitioner is not entitled to a 23 child tax credit for either of these children. 24 25 Section 32(a)(1) permits an eligible individual an earned income credit against ,the individual's income K (973)406.2250|operations©escribersmetlwww.escribersnet , 10 1 2 3 4 5 6 7 8 9 tax liability. The amount of the credit varies depending on whether the taxpayer has one qualifying child, two qualifying children, three or more qualifying children, or no qualifying children. Sec. 32(b). A "qualifying child" means a qualifying child of the taxpayer as defined in section 152(c). Sec. 32(c)(3) (A). Because neither of the other two children meet the definition of qualifying child with respect to petitioner for purposes of section 152, neither 10 child may be treated as petitioner's qualifying child for 11 12 13 14 15 purposes of the earned income tax credit. Petitioner's earned income credit is properly computed with reference to only one qualifying child. A decision will be entered under Rule 155. This concludes the Court's oral Findings of Facts and Opinion 16 in this case. THE CLERK: All rise. 17 18 19 20 21 22 23 24 25 (Whereupon, at 10:35 a.m., the above-entitled matter was concluded.) (973)406-2250|operations@escribers.net|wwwsscribersfiet