TAX COURT OPINION

Case: Bryan Douglas Wendt
Docket Number: 11366-17S
Judge: Carluzzo
Opinion Type: bench
Filed: 03/30/2018
Pages: 11

SEC UNITED STATES TAX COURT WASHINGTON, DC 20217 BRYAN DOUGLAS WENDT, ET AL., Petitioners, v. ) ) ) ) Docket No. 11366-17S, 14535-17S COMMISSIONER OF INTERNAL REVENUE, Respondent. ) ) ) 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 cases before Chief Special Trial Judge Lewis R. Carluzzo at Dallas, Texas, containing his oral findings of fact and opinion rendered at the trial session at which the cases were heard. In accordance with the oral findings of fact and opinion, an appropriate Order granting respondent's motion for summary judgment, filed December 18, 2017, will be issued, and decisions will be entered for respondent. (Signed) Lewis R. Carluzzo Special Trial Judge Dated: Washington, D.C. March 30, 2018 SERVED Mar 30 2018 IN THE UNITED STATES. TAX COURT 1 In the Matter of: BRYAN DOUGLAS WENDT, ET AL., Petitioners, v. COMMISSIONER OF INTERNAL REVENUE, Respondent. ) ) ) ) Docket Nos. 11366-17S ) 14535-17S ) ) ) ) ) ) ) & U.S. Cthse. Earie Cabell Fed. Bldg. 1100 Commerce Street Room 726, 7th Floor Dallas, Texas 75242 March 7, 2018 The above-entitled matter came on for bench opinion, pursuant to notice at 10:46 a.m. BEFORE: HONORABLE LEWIS R. CARLUZZO Special Trial Judge APPEARANCES: For the Petitioner: No Appearance For the Respondent: No Appearance 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 (973)406-2250|operationseescraaers.netlwww.ese,1bers.net P R O C E E D I N G S 2 (10:46 a.m.) THE CLERK: Docket number 11366-17S, Bryan Douglas Wendt, and docket number 14535-17S, Starla Ann 1 2 3 4 5 Wendt, consolidated cases. 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 2 4 25 (Whereupon, a bench opinion was rendered.) (973)406-2250 l operationseescrbersnet | www.escribers.net Bench Opinion by Special Trial Judge Lewis R. Carluzzo 3 March 7, 2018 Bryan Douglas Wendt, et al. v. Commissioner of Internal Revenue Docket Nos. 11366-17S; 14535-17S The Court has decided to render oral findings of fact and opinion in these consolidated cases and the following represents the Court's oral findings of fact, and opinion (bench opinion). Unless otherwise noted, section 1 2 3 4 5 6 7 8 9 10 references made in this bench opinion are to the Internal 11 Revenue Code of 1986, as amended, in effect for the 12 relevant period, and Rule references are to the Tax Court 13 Rules of Practice and Procedure. This bench opinion is 14 made pursuant to the authority granted by section 7459(b) 15 16 17 18 and Rule 152. This consolidated proceeding for the redetermination of a deficiency involves two small tax cases each subject to the provisions of section 7463 and 19 Rules 170 through 175. Except as provided in Rule 152(c), 20 this bench opinion shall not be cited as authority, and 21 22 23 24 25 pursuant to section 7463(b) the decisions entered in this case shall not be treated as precedent for any other case. The matter is now before the Court on respondent's motion for summary judgment, filed December 18, 2017. A hearing was conducted on respondent's motion (973)406-2250 l operationseescr82ersnet|www.escribersnet on March 6, 2018. Hannah K. Wilkins appeared on behalf of respondent and argued in support of the motion. Bryan Douglas Wendt (petitioner) appeared on his own behalf and opposed it. There was no appearance by or on behalf of 4 Starla Ann Wendt. Summary judgment is intended to expedite litigation and avoid unnecessary and expensive trials. See Fla. Peach Corp. v. Commissioner, 90 T.C. 678, 681 (1988). Summary judgment may be granted with respect to 1 2 3 4 5 6 7 8 9 10 all or any part of the legal issues in controversy "if the 11 pleadings, answers to interrogatories, depositions, 12 admissions, and any other acceptable materials, together 13 with the affidavits or declarations, if any, show that 14 15 16 17 there is no genuine dispute 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), aff'd, 17 F.3d 965 (7th Cir. 1994); Zaentz v. 18 Commissioner, 90 T.C. 753, 754 (1988); The moving party 19 bears the burden of proving that there is no genuine issue 20 of material fact, and factual inferences will be read in a 21 manner most favorable to the party opposing summary 22 23 24 judgment. See Dahlstrom v. Commissioner, 85 T.C. 812, 821 (1985); Jacklin v. Commissioner, 79 T.C. 340, 344 (1982). Taking into account the statements made in the 25 motion now before the Court, the position taken in (973)406-2250|operatkms@escrbersmet|www.esc,ibers.net 5 1 2 3 4 5 6 7 8 9 petitioners' response, filed January 17, 2018, and the statements made by the parties at the hearing, we are satisfied that there are no genuine issues of material fact in dispute in this case, and that decisions can be entered as a matter of law. See Rule 121. Those undisputed facts are easily summarized below along with our findings and conclusions. Petitioners are husband and wife; at the time the petition was filed, they lived in Texas. Petitioners 10 have at least two children, one who attended Texas Tech 11 University during 2014. Petitioners paid the tuition and 12 13 educational expenses (educational expenses) related to that child's enrollment there. The educational expenses 14 are taken into account in two ways in the computation of 15 petitioners' 2014 Federal income tax liability as shown on 16 their timely filed 2014 joint Federal income tax return 17 18 19 (return). First, petitioners claimed a deduction for the educational expenses, the computation of which is shown on a Form 8917, Tuition and Fees Deduction, included with 20 their return (deduction for tuition and fees). Second, 21 petitioners claimed a credit for the educational expenses, 22 the computation of which is shown on a Form 8863, 23 Education Credits (American Opportunity and Lifetime 24 25 Learning Credits), also included with their return (education credit). EM (973)406-2250]operations@escribetsmet|www.escribers.net 6 1 2 3 4 5 6 7 8 9 According to the notice of deficiency dated April 3, 2017 (notice), that forms the basis for this case, petitioners are not entitled to "claim the deduction for Tuition and Fees and Education Credits for the same student". The deduction for tuition and fees is disallowed in the notice, and the deficiency determined in the notice is attributable entirely to that disallowance. As we have observed in countless opinions, deductions and credits are a matter of legislative grace, 10 and the taxpayer bears the burden of proving entitlement 11 12 13 14 15 to any claimed deduction or credit. Rule 142(a); INDOPCO, Inc. v. Commissioner, 503 U.S. 79, 84 (1992); New Colonial Ice Co. v. Helvering, 292 U.S. 435, 440 (1934). Subject to various conditions and limitations not here in dispute, section 222(a) allows a taxpayer to 16 deduct "qualified tuition and related expenses" paid 17 during the taxable year. The educational expenses 18 petitioners paid in connection with their child's 19 enrollment at Texas Tech University fit within the meaning 20 of "qualified tuition and related expenses" as used in the 21 22 23 24 25 statute, and there is no dispute that petitioners paid those expenses during 2014, but section 222(c)(2) (A) expressly prohibits a deduction for tuition and fees if the taxpayer "elects to have section 25A apply with respect to such individual for such year." (973)406.2250|operationseescribersnet|www.escribers.net 7 1 2 3 4 5 In general, and subject to various conditions and limitations, section 25A allows various types of credits for "qualified tuition and related expenses". Sec. 25A(a)(1) and (2), (b), (c), (f)(1). Respondent's position proceeds as though the educational expenses fit 6 within the definition of "qualified tuition and related 7 8 9 10 11 expenses" within the meaning of section 25A and qualify for a credit under that section, and further that the education credit claimed on petitioners' return reflects that they "elected" to have the credit apply under section 25A within the meaning of section 222. According to 12 petitioners, they did not elect to have section 25A apply, 13 and the education credit claimed on their return was not 14 15 16 17 claimed under section 25A. According to petitioners, the structure of section 25A, and the titles of the various credits allowable under that section, that is, the Hope 18 Scholarship Credit, the Lifetime Learning Credit and the 19 American Opportunity Tax Credit (AOTC), including the 20 overlap of the AOTC with the Hope Scholarship Credit, see 21 22 23 sec. 25A(i), make the statute difficult to apply and subject the statute to differing interpretations. Suffice it to note that we do not share their view in this regard. 24 According to petitioners, their interpretation of section 25 25A informs their position that the education credit was (973)406-2250|operations@escribersmetjwww.escribers.net 8 1 2 3 4 5 6 7 8 9 not claimed under that statute. As noted, however, Federal income tax credits are allowable only as provided by statute. If the petitioners did not elect to have section 25A apply to the education expenses, then we wonder under what authority the credit has been claimed. At the hearing petitioner candidly admitted that petitioners could not identify any other provision of the Internal Revenue Code that would allow for a credit for the educational expenses, and we 10 are aware of none. Ironically and arguably, petitioners' 11 position could result in the disallowance of the education 12 13 credit, which in turn would allow the deduction for tuition and fees, but result in a substantially larger 14 deficiency. To respondent's credit, respondent does not 15 alternatively argue for that result. 16 17 18 19 Petitioners' ill-advised claim that the education credit does not reflect their election to have section 25A apply to the education expenses is entirely undermined by a simple review of their return, and we are 20 not impressed with their attempt to distance themselves 21 22 from that election. On line 68 of the return, petitioners claim the AOTC, a credit specifically and only allowable 23 under section 25A. Furthermore, the Form 8863 attached to 24 their return includes information specifically 25 attributable to an allowance of a section 25A credit, (973)406-2250 l operationseescrbersnetj wwv,.escribers.net 9 including an acknowledgment that their child was enrolled at Texas Tech University for the period required under the statute, see Form 8863, line 24 and sec. 25A(b)(2) (B), and their child was not convicted of a felony drug offense during the relevant period, see Form 8863, line 26 and sec. 25A(b)(2)(D). Under the circumstances, we are satisfied that the undisputed facts as summarized above in support of respondent's motion show that petitioners elected to claim 1 2 3 4 5 6 7 8 9 10 a section 25A credit for the education expenses, even if 11 12 13 14 15 16 as they now claim, that election was unintended. That being so, the express and clear language of section 222(c)(2) (A) provides that the deduction for tuition and fees here in dispute is not allowable. It follows that respondent's disallowance of that deduction is sustained. To reflect the foregoing, an appropriate order 17 granting respondent's motion will be issued, and decisions 18 will be entered for respondent. 19 This concludes the Court's bench opinion in this (Whereupon, at 11:01 a.m., the above-entitled matter was concluded.) 20 matter. 21 22 23 24 25 EM (973)406-2250loperationseescribersnet|www.escribers.net 10 1 2 3 4 5 6 7 8 9 CERTIFICATE OF TRANSCRIBER AND PROOFREADER CASE NAME: Bryan Douglas Wendt, et al. v. Commissioner DOCKET NO.: 11366-17S; 14535-17S We, the undersigned, do hereby certify that the foregoing pages, numbers 1 through 10 inclusive, are the true, accurate and complete transcript prepared from the verbal recording made by electronic recording by Stephanie Novak on March 7, 2018 before the United States Tax Court at its session in Dallas, TX, in accordance with the 10 applicable provisions of the current verbatim reporting 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 contract of the Court and have verified the accuracy of the transcript by comparing the typewritten transcript against the verbal recording. , Meribeth Ashley, CET-507 Transcriber Dena Farbman, CET-629 Proofreader 3/9/18 Date 3/9/18 Date 73)406-2250|operationseescribersnet|www.escribers.net