TAX COURT OPINION

Case: James J. O'Sullivan
Docket Number: 10796-09S
Judge: Colvin
Opinion Type: bench
Filed: 06/29/2010
Pages: 8

UNITED STATES TAX COURT WASHINGTON, D .C . 2021 7 JAMES J . O'SULLIVAN, Petitioner, v . Docket No . 10796-09 S COMMISSIONER OF INTERNAL REVENUE, Respondent . O R D E R Pursuant to Rule 152(b), Tax Court Rules of Practice and Procedure, it i s 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 of the above case before Special Trial Judge Lewis R . Carluz .zo at Boston , Massachusetts , on June 15, 2010, containing his oral findings of fact and opinion rendered at the conclusion of trial . In accordance with the oral findings of fact and opinion, decision will be entered for respondent . (Signed ) Lewis R. Carluzzo Special Trial Judg e Dated : Washington, D .C . June 29, 2010 SERVED JUN 3 0 2010 4 1 Bench Opinion by Special Trial Judge Lewis R . Carluzzo 2 O'Sullivan v . Commissioner Docket No . 10796-09S 3 June 15, 201 0 4 THE COURT : The Court has decided to render 5 oral findings of fact and opinion in this case, an d 6 the following represents the Court's oral findings of 7 fact and opinion . 8 This proceeding for the redetermination of a 9 deficiency is a small tax case subject to th e 10 provisions of section 7463 of the Internal Revenu e 11 Code of 1986, as amended, and Rules 170 through 175 of 12 the Tax Court Rules of Practice and Procedure . 13 This bench opinion is made pursuant to the 14 authority granted by section 7459(b) of the Internal 15 Revenue Code of 1986, as amended, and Rule 152 of th e 16 Tax Court Rules of Practice and Procedure . Subsequent 17 section references contained in this bench opinion are 18 to sections of the Internal Revenue Code of 1986, as 19 amended, in effect for 2007 . ' 20 James J . O'Sullivan appeared pro se . Derek 21 W . Kelley appeared on behalf of respondent . 22 In a notice of deficiency dated February 6, 23 2009, respondent determined 'a $1,044 .00 deficiency in 24 petitioner's 2007 Federal income tax . The issues for 25 decision are : (1) Whether petitioner is entitled to a Heritage Reporting Corporation (202) 628-4888 5 1 dependency exemption deduction for any of his three 2 grandchildren shown as dependents on his Federa l 3 income tax return ; (2) whether petitioner qualifies as 4 a head of household ; (3) whether petitioner i s 5 entitled to a child tax credit . 6 Some of the facts have been stipulated and 7 are so found . At the time the petition was filed , 8 petitioner resided in Massachusetts . 9 During 2007, petitioner lived with his adult 10 daughter and three of her children (petitioner's three 11 grandchildren) in a house in Harwich, Massachusetts . 12 Petitioner owned the house and was solely responsible 13 for mortgage payments, real estate taxes and utility 14 bills attributable to that residence . He also paid 15 for the food consumed at the house and no doubt paid 16 or contributed towards other unspecified expense s 17 relating to the support of his three grandchildren . 18 On his Federal income tax returns for years prior to 19 2007, petitioner apparently treated one or more of his 20 three grandchildren or other of his daughter' s 21 children (perhaps in different combinations) as his 22 dependents . 23 As relevant here, on his self-prepared 2007 24 Federal income tax return, petitioner : (1) Shows his 25 filing status as a head of household ; (2) claims a Heritage Reporting Corporation (202) 628-4888 6 1 dependency exemption deduction for each of his three 2 grandchildren ; and (3) claims a child tax credit b y 3 treating each of his three grandchildren as a 4 qualifying child for purposes of that credit . 5 Petitioner's three grandchildren are also shown a s 6 dependents on his daughter's 2007 Federal income tax 7 return . 8 In the notice of deficiency that forms the 9 basis for this case, respondent : (1) Disallowed the 10 dependency exemption deductions claimed fo r 11 petitioner's three grandchildren ; (2) change d 12 petitioner's filing status from head of household to 13 single, and (3) disallowed the child tax credi t 14 claimed on his return . 15 Because of its impact on the other tw o 16 issues, we'll begin our discussion with petitioner's 17 entitlement to the dependence exemption deductions 18 claimed for his three grandchildren . 19 In general, a taxpayer is entitled i s 20 entitled to an additional exemption deduction for each 21 individual who is a dependent of the taxpayer for the 22 taxable year . Sec . 151 (a), (c) . Ignoring exemptions 23 not relevant here, the term'"dependent" as used i n 24 section 151 and elsewhere in the Internal Revenue 25 Code, means the taxpayer's qualifying child or a Heritage Reporting Corporatio n (202) 628-4888 7 1 qualifying relative . Sec . 152(a) . 2 Subject to special rules not relevant here, 3 the term "qualifying child" includes, among othe r 4 relationships, a grandchild of the taxpayer who (1 ) S has the same principal place of abode as the taxpayer 6 for more than one half of the year ; (2) meets certain 7 age requirements, and (3) has not provided over on e 8 half of his or her own support for the taxable year . 9 Sec . 152(c) . These requirements can loosely be stated 10 as the relationship test, the residency test, the age 11 test, and the support test .,, In this case respondent 12 agrees that each of petitioner's grandchildre n 13 satisfies each of these tests, but relying on Section 14 152(c) (4) (A), argues that none may be treated as his 15 qualifying child for purposes of an exemptio n 16 deduction . 17 That section, sometimes referred to as a 18 "tiebreaker," provides, in essence, that if for the 19 same year an individual "may, be and is claimed as a 20 qualifying child by two or more taxpayers" as was the 21 situation here with respect to petitioner's thre e 22 grandchildren, then the individual shall be treated as 23 the qualifying child of the individual's parent . In 24 this case, because petitioner's daughter treated each . 25 of petitioner's three grandchildren as a qualifyin g Heritage Reporting Corporation (202) 62 8 -4888 8 1 child on her 2007 return, petitioner may not so treat 2 any of them on his . This is so even though, a s 3 petitioner suggests, the tax benefits for her doing so 4 were at best, marginal . 5 Because none of petitioner's thre e 6 grandchildren may be treated as his qualifying child 7 under section 152, he is not entitled to a dependency 8 exemption for any of them . 'Respondent's disallowances 9 of those deductions are sustained . 10 Next we turn our attention to the child tax 11 credit and note that our resolution of petitioner's 12 entitlement to the dependency exemption deductions in 13 effect resolves this issue as well . 14 In general and subject to various conditions 15 and limitations, the taxpayer is entitled to a child 16 tax credit with respect to each qualifying child o f 17 the taxpayer . Sec . 24(a) . The term "qualifying 18 child" as used in section 24 means an individual who 19 has not attained the age of' ;17, and who otherwise fits 20 within the definition of a qualifying child as defined 21 in section 152(c) . See Sec 24 (c) . 22 Petitioner treated each of his thre e 23 grandchildren as a qualifying child for purposes of 24 the child tax credit claimed on his 2007 return . As 25 discussed above, none of them fit within the Heritage Reporting Corporation (202) 62''8-4888 9 1 definition of petitioner's qualifying child unde r 2 section 152(c) . Therefore, none of them fit within 3 the definition of a qualified child for purposes of 4 section 24 . It follows that petitioner is no t 5 entitled to the child tax credit claimed on his 200 7 6 return because he does not have a qualifying child for 7 purposes of that credit . Respondent's disallowance of 8 that credit is sustained . 9 Lastly, because none of petitioner's three 10 grandchildren fit within the definition of hi s 11 qualifying child as defined,in section 152(c), he does 12 not qualify as a head of household . See sec . 13 2(b) (1) (A) (i) . Respondent's change of his filing 14 status from head of household to single is sustained . 15 In closing we think it appropriate t o 16 comment on petitioner's observation that under similar 17 circumstances in years prior to 2007, dependenc y 18 exemption deductions claimed for one or more of his 19 three grandchildren and his filing status as head of 20 household have gone unchallenged . As briefl y 21 explained to him during trial, effective for years 22 beginning after December 31, 2004, changes to th e 23 applicable laws regarding a taxpayers status as a head 24 of household and entitlement to additional exemption 25 deductions for dependents, however, reversed wha t Heritage Reporting Corporation (202) 628-4888 1 0 1 might have been the income tax consequences resulting 2 from similar circumstances for prior years . See the 3 Working Families Tax Relief Act of 2004, P .L . 108-311, 4 118 Stat . 1166 . As applicable to petitioner' s 5 situation for the year in issue, however, we doub t 6 that petitioner would characterize the changes as "tax 7 relief" . Nevertheless, for what it is worth, w e 8 expect that petitioner should take some consolation b y 9 the fact that at least for 2007 the tax disadvantages 10 he suffered as a result of the changes in th e 11 applicable laws have been somewhat offset by wha t 12 appears to be respondent's treatment for reasons not 13 apparent to the Court of his Social Security benefits 14 as entirely excludable from,his 2007 income . See sec . 15 86 . 16 To reflect the foregoing, decision will be 17 entered for respondent . 18 This concludes the Court's oral findings of 19 fact and opinion in this case . 20 (Whereupon, at 9 :30 a .m ., the bench opinion 21 in the above-entitled matter was concluded . ) 2 2 23 24 25 Heritage Reporting Corporation (202) 628-4888