TAX COURT OPINION

Case: Tim R. Blair
Docket Number: 26707-14S
Judge: Armen
Opinion Type: bench
Filed: 09/28/2015
Pages: 8

ALS UNITED STATES TAX COURT WASHINGTON, DC 20217 TIM R. BLAIR, Petitioner, v. ) ) ) ) Docket No. 26707-14S. 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 petitioner and to respondent a copy of the pages of the transcript of the trial in the above case before Special Trial Judge Robert N. Armen, Jr. at Peoria, Illinois, containing his oral findings of fact and opinion rendered at the trial session at which the case was heard. In accordance with the oral findings of fact and opinion, a Decision will be entered under Rule 155. (Signed) Robert N. Armen, Jr. Special Trial Judge Dated: Washington, D.C. September 28, 2015 SERVED Sep 28 2015 Capital Reporting Company Bench Opinion by Special Trial Judge Robert Armen, Jr. 3 September 15, 2015 Tim R. Blair v. Commissioner Docket No.. 26707-14 I. 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 UPON AS PRECEDENT IN ANY OTHER CASE. See Rule 152(c), Tax Court Rules of 6 Practice and Procedure. II. This proceeding was heard as a Small Tax Case pursuant to the provisions of section 7463 of the Internal Revenue Code of 1986, as amended, and Rules 170 through 175 of the Tax Court Rules of 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 Practice and Procedure. 20 21 22 23 24 25 III. This bench opinion is made pursuant to the authority granted by section 7459(b) of the Internal Revenue Code of 1986, as amended, and rule 152 of the Tax Court Rules of Practice and Procedure. 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 4 Hereinafter in this bench opinion, and unless otherwise indicated, all section numbers refer to the Internal Revenue Code, as amended and in effect for 2012, the taxable year in issue, and all Rule numbers refer to the Tax Court Rules of Practice and Procedure. IV. Petitioner appeared on his own behalf. 1 2 3 4 5 6 7 8 9 10 Elizabeth McBrearty appeared on behalf of respondent. 11 12 13 14 15 16 17 18 19 V. In a notice of deficiency issued to petitioner on October 6, 2014, respondent determined a deficiency in petitioner's 2012 Federal income tax of $2, 440. VI. The issue for decision by the Court is 20 whether petitioner is entitled to an earned income credit, and if so, in what amount. The resolution of this issue turns on whether petitioner's aunt is a "qualifying child" for purposes of the earned income credit. 21 22 23 24 25 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company VII. 5 Some of the fac6 haWEbeen stipulated, and f6L they are so found. Petitioner resided in the State of Illinois at the time that the petitiongf was filed with the 1 2 3 4 5 6 Court. 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 The taxable year at issue in this case is the calendar year 2012. Petitioner filed a Form 1040, U.S. Individual Income Tax Return, for 2012. On his return, petitioner listed his filing status as head of household and he claimed three personal exemptions, one for himself and two for his dependents, namely, his mother Anna Isaacs and his adult aunt Dorothy Hicks. Petitioner properly reported his income on his return, but the amount thereof was eclipsed by the sum of his standard deduction and personal exemptions, thereby resulting in negative taxable income. Thus, petitioner reported no "regular" income tax, but he did report self-employment tax of $949, which was offset by a claimed earned income credit of $2,423, resulting in a claimed overpayment of $1,474. In support of the earned income credit, petitioner identified his aunt Dorothy Hicks as being 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 6 a "qualifying childt with a disability. II By notice of deficiency dated October 6, 2014, respondent disallowed the head of household filing status claimed by petitioner and allowed instead "single" filing status. Respondent also disallowed an earned income credit of $2,440. Respondent did not explain in the notice why he disallowed the credit in an amount greater than that claimed by petitioner on his tax return. Respondent allowed petitioner to claim his mother and his aunt as dependents for dependency exemption purposes. Petitioner timely filed a petition commencing the instant case, arguing that he was the sole caregiver for his disable aunt and that she qualifies as a "qualifying child" with a disability for purposes of the earned income credit. Earned Income Credit VIII. In the case of an eligible individual, section 32(a) allows an earned income credit. As applicable herein, the term "eligible individual" 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 means an individual who has a "qualifying child" for 24 25 the taxable year. Sec. 32(c)(1)(A)(i); cf. sec. 32(c)(A)(1)(ii). In turn, and as relevant herein, 866.488.DEPO www.CapitalReportingCompany.com 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 Capital Reporting Company 7 the term "qualifying child" means a qualifying child of the taxpayer as defined in section 152(c). Sec. 32(c)(3)(A). Generally, a qualifying child must: (1) bear a specific relationship to the taxpayer; (2) have the same principal place of abode as the taxpayer for more than one-half of such taxable year; (3) meet certain age requirements or be disabled; and (4) not have provided over one-half of such individual's support for the taxable year in issue. Sec. 152(c). Section 152(c)(2) describes.the possible relationships to be a "qualifying child", which relationships are: a child of the taxpayer or a descendant of such child; or a brother, sister, stepbrother, or stepsister of the taxpayer or a descendant of any such relative. Petitioner's aunt, although disabled, does not fall into one of the relationships necessary to satisfy the relationship test and thus be considered to be a "qualifying child". Therefore, petitioner did not have a "qualifying child) in 2012 because the relationship 4Q- test of section 152(c)(2) was not satisfied by petitioner's disabled aunt. As a result, the Court does not need to address whether petitioner's 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 8 disabled aunt satisfied the other requirements to be a "qualifying child". Notwithstanding the foregoing, given the amount of petitioner's income in 2012, petitioner qualifies for the earned income credit in respect of himself alone, i.e., without the need for a qualifying child, albeit in a much more modest amount than he claimed on his return. Thus, looking to the earned income credit tables for 2012, it would tentatively appear that petitioner qualifies for an earned income credit of $475 on the basis of his reported income for 2012. However, the Court will leave the allowable amount of the earned income credit to the parties to determine as part of their Rule 155 computation. Head of Household Filing Status We turn now to petitioner's filing status. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 Generally, head of household filing status, as 19 20 21 22 23 24 25 claimed by petitioner on his 2012 return, is more advantageous than single filing status, as allowed by respondent, because of a more generous standard deduction, as well as lower tax rates (at least at higher income levels). Secs. 1(b), 63(c)(2)(B). However, in the instant case, petitioner's income was such that even the sum of (1) the standard deduction 866.488.DEPO www.Capita1ReportingCompany.com Capital Reporting Company 9 for "single" filing status and (2) exemptions for himself, his mother, and his aunt eclipses his adjusted gross income so as to reduce his taxable below zero. Therefore, because petitioner's filing status has no tax effect, we need not decide this issue. IX. In order to give effect to the foregoing, decision will be entered under Rule 155 for computation of petitioner's earned income credit in respect of himself only, i.e., with no "qualifying children". X. THIS CONCLUDES THE COURT'S ORAL FINDINGS OF FACT AND OPINION IN THIS CASE. (Whereupon, at 9:30 a.m., the above- entitled matter was concluded.) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 866.488.DEPO www.Capita1ReportingCompany.com