TAX COURT OPINION

Case: Daniel D. Carlile & Laura M. Carlile
Docket Number: 10425-13S
Judge: Marvel
Opinion Type: bench
Filed: 03/11/2015
Pages: 12

SEC UNITED STATES TAX COURT WASHINGTON, DC 20217 DANIEL D. CARLILE & LAURA M. CARLILE, Petitioner(s), v. ) ) ) ) ) ) Docket No. 10425-13S 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 to petitioners and to respondent a copy of the pages of the transcript of the proceedings of the above case before Judge L. Paige Marvel at Oklahoma City, Oklahoma, on February 26, 2015, containing the Court's oral fmdings of fact and opinion. In accordance with the oral findings of fact and opinion, decision will be entered under Rule 155. (Signed) L. Paige Marvel Judge Dated: Washington, D.C. March 11, 2015 SERVED Mar 12 2015 Capital Reporting Company Bench Opinion by Judge L. Pa ge Marvel Daniel D. Carlile & Laura M. Carlile v. Commissioner 3 Docket.No. 10425-13S February 26, 2015 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 1 2 3 4 5 6 7 8 9 10 OTHER CASE. 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 This case was heard pursuant to the provisions of section 7463 of the Internal Revenue Code of 1986 as amended, and Rules 170 through 174 of the Tax Court Rules of Practice and Procedure. Pursuany to section 7463(b), the decision to be entered is not reviewable by any other court, and this opinion shall not be treated as precedent for any other case. 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 an.d Procedure. Unless otherwise indicated, subsequent section references are to the Internal Revenue Co'de of 1986 as amended and in effect for the year in ÈSsue, and Rule 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 4 1 2 3 4 5 6 7 8 9 10 11 12 references are to the Tax Court Rules of Practice and Procedure. Mr. Carlile appeared pro se and on behalf of Mrs. Carlile. Jamie M. Stipek appeared on behalf of respondent. Petitioners resided in Washington at the time they filed their petition in this Court, but they moved before trial and now live in Oklahoma. Respondent determined a deficiency of $7,884 in petitioners' Federal income tax for 2010. Respond'ent has now conceded that petitioners are entitled to two dependency exemption deductions, the earned income credit (EIC), and the child tax credit 13 with respect to two minor chi.ldren. Respondent also 14 15 16 17 18 has conceded the accuracy-related penalty under section 6662(a). The issues remaining for decision are: (1) whether petitioners lare entitled to claim dependency exemption deductiöns for Mrs. Carlile's adult daughter, Ashley Nicole Prince, and Ms. 19 Prince's minor daughter, G.P.; (2) whether 20 21 22 23 24 25 petitioners are entitled to claim an EIC with respect to Ms. Prince for 2010; and (3) whether petitioners are entitled to claim a child tax credit with respect to G.P. for 2010. We conclude that petitioners are not so entitled. FINDINGS OF FACT 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 5 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 Some of the relevañt facts have been stipulated. The stipulation óf facts is incorporated herein by this reference. Petitioners timely filed a joint Form 1040, U.S. Individual Income Tax Return, for taxable year 2010. On their 2010 return, petitioners claimed dependency exemption deductions for Mrs. Carlile's adult daughter, Ms. Prince, and Ms. Prince's daughter, G.P. Ms. .Prince turned 21 years old in 2010, and G.P was an infant in 2010. Petitioners claimed an EIC with respect to Ms. Prince and they claimed the child tax credit with respect to G.P. They assert that Ms. Prince and G.P. meet the definition of qualifying child. On February 4, 2013, respondent issued a notice of deficiency to petit oners for taxable year 2010. In the notice, respondent disallowed the dependency exemptions for Ms. Prince and G.P., as 19 well as the EIC and child tax credit. 20 21 22 23 24 25 DISCUSSION The deficiency determined by the Commissioner in a notice of deficiency is presumed correct, and the taxpayer ordinarily has the burden of proving that the determination is erroneous. See Rule 142; Welch v. Helvering, 290 U.S. 111, 115 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 6 1 2 3 4 5 6 7 (1933). The taxpayer also ge erally bears the burden of proving that he is entitlèd to any claimed deduction. See Rule 142; INDOPCO, Inc. v. Commissioner, 503 U.S. 79, 84 (1992). A taxpayer is generally required to keep sufficient records to substantiate any claimed deduction. See sec. 6001; Hradesky v. Commissioner, 65 T.C. 87, 89 (1975), 8 aff'd per curiam, 540 F.2d 821 (5th Cir. 1976). 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 The burden of proof shifts to the Secretary if the taxpayer produces credible evidence with respect to any factual issue relevant to ascertaining the taxpayer's liability for any tax imposed by subtitle A or B of the Code and the taxpayer satisfies the requirements of section 7491(a)(2). Sec. 7491(a)(1). Petitioners have not done so in this case and therefore bear the burden of convincing the Court that respondent erred by disallowing the dependency exemption deductions, the EIC, and the child tax credit. Dependency Exemption Deductions Section 151(c) permits a taxpayer to deduct an exemption for each dependent as that term is defined under section 152. Section 152(a) provides that a dependent must either be a qualifying child or a qualifying relative. 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 7 1 2 3 4 5 6 Section 152(c)(1) efines a qualifying child as a child who bears a specified relationship to the itaxpayer, who lived with the taxpayer for more than one-half of the tax year at issue, and who did not provide more than one-half of his or her own support during the calendar year. A qualifying child 7 must either be less than 19 years old or a student 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 who is less than 24 years old, or permanently and totally disabled. Sec. 152(c)(3). In short, the taxpayer must show that the child satisfies both the age and relationship requirements, the residency requirement, and the support requirement of section 152(c)(1) and (3) for the child to be the taxpayer's qualifying child for a particular taxable year. Respondent does not dispute that Ms. Prince and G.P. bear quali.fying relationships to petitioners and that G.P. meets the age requirement under section 152(c). However, respondent contends that petitioners have not established that Ms. Prince was a full-time student·for at least five months during 2010, see sec. 152(f)(2), or that the support and residency requirements of section 152(c) have been satisfied. We agree. Because Ms. Prince Was not less than 19 years old during 2010, petitioners can claim her as a 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 8 1 2 3 qualifying child only if she was a full-time student or totally and permanently disabled. Petitioners do not assert that Ms. Prince is disabled. At trial 4 Mr. Carlile testified that during 2010 Ms. Prince 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 took online classes at a community college based in Texas. The Court also admitted into evidence a document that purports to be a copy of Ms. Prince's college transcript for 2010. However, the document does not contain Ms. Prince's name, address, or relevant dates and does not show that Ms. Prince was taking classes online. The document identifies Ms. Prince only by birth date, and Ms. Prince did not testify. We conclude that the record does not allow us to conclude that Ms. Prince was a full-time student in 2010 as required by section 152(c)(3). Mr. Carlile also testified that Ms. Prince lived with petitioners for pa t of 2010 and lived in an apartment for the rest of the year. However, petitioners did not produce any document or other evidence that corroborates Mr. Carlile's testimony or that shows for how long Ms. Prince lived with petitioners in 2010. The record shows that Ms. Prince lived with petitioners as of October 20, 2009, and subsequently moved out of petitioners' house for a time before moving back in with them. However, we are t 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 1 2 3 4 unable to conclude on the basis of the record before us that Ms. Prince lived with petitioners for more than one-half of 2010. Consequently, petitioners have failed to convince us that Ms. Prince was 5 petitio ers' qualifying child for 2010. 6 7 8 Mr. Carlile testified that G.P. lived with Ms. Prince throughout 2010. Because we are unable to conclude that Ms. Prince lived with petitioners for 9 more than one-half of 2010, we likewise cannot 10 11 conclude that G.P. lived with petitioners for the . requisi e time. See sec. 152(c). Accordingly, 12 petitio ers have failed to carry their burden of 13 14 15 16 17 18 19 20 21 22 23 24 25 proving that G.P. is petitioners' qualifying child for 2010. Section 152(d) defines a qualifying relative as an individual who bears a specified relationship to the taxpayer, who earned gross income less than the exemption amount defined in section 151(d), who had more than one-half of his or her support provided for by the taxpayer during the tax year, an who is not the qualifying child of any other ta payer. An individual satisfies the specified relationship requirement if the individual is a child or grandchild of the taxpayer. Sec. 152(d)(2)(E). For taxable year 2010, the exemption amount defined 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 10 1 2 3 4 5 6 7 8 9 10 11 12 in section 151(d) equaled $3,650. See sec. 151(d)(4). Although Mr. Carlile testified that Ms. Prince did not have any income for 2010, Ms. Prince did not testify to this effect and petitioners did not offer any evidence to substantiate their claim. Because| Mr. Carlile testified that Ms. Prince had a volatile relationship with G.P.'s father and that Ms. Prince bhared an apartment with G.P.'s father for some part of 2010, Mr. Carlile failed to convince us that he w.as really in a position to testify accurately about Ms. Prince's income or any other support she may have receiYed during 2010. Ms. 13 Prince's testimony would have been extremely helpful 14 in building a proper and believable record, but Mr. 15 Carlile did not call her as a witness and his 16 17 18 19 20 explanation for not calling her was not convincing. We conclude therefore.that petitioners have failed to prove that Ms. Prince's income was less than $3,650 in 2010. We also note that petitioners must prove 21 with competent evidence the total amount of Ms. 22 Prince's and G.P.'s support furnished by all sources 23 24 25 for 2010 in order for us to conclude that petitioners provided more than one-half of that support. See Blanco v. Commissioner, 56 T.C. 512, 514-515 (1971). 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 11 1 Mr. Ca lile testified that Ms. Prince received one 2 month's support from the Women in Crisis (WIC) 3 4 progra and that petitioners provided most of the other support for Ms. Prince.and G.P., including 5 utilities, Internet, and diapers. However, Mr. 6 Carlile was uncertain about the support if any 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 furnis ed by G.P.'s father and his testimony standing alone does not enable us to calculate the total amount of support furnished to Ms. Prince or G.P. during 2010, nor does it permit us to ascertain how much of their support was actually furnished by petitioners. Accordingly, we conclude that petitioners have failed to carry their burden of proving that Ms. Prince and G.P. were petitioners' qualifying children or relatives for 2010. Petitioners are not entitled to the claimed dependency exemption deductions. The Earned Income Credit Section 32 permits taxpayers with low earned income who qualify as "eligible individuals" to clai a tax credit. An eligible individual is (a) a person who has a "qualifying child", or (b) a person between the ages of 25 and 65 who resided in the United States for more than half the taxable year and who was not a dependent for whom a dependency 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 12 1 2 3 4 5 exemption deduction is allowed to another taxpayer. Sec. 32(c)(1) (A). The term "qualifying child" has the same meaning for purposes of both section 152(c) and section 32. Sec. 32(c)(3). Petitioners claimed the EIC with respect to 6 Ms. Prince for 2010. As we explained earlier, 7 8 9 petitioners have not proven that Ms. Prince was their qualifying child during 2010. Consequently we sustain respondent's determination disallowing the EIC with 10 respect to Ms. Prince. 11 Child Tax Credit 12 13 14 15 16 17 18 19 20 21 22 Section 24(a) allows a taxpayer a credit up to $1,000 against his or her Federal income tax liability for each qualifying child. The term "qualifying child" means a qualifying child of the taxpayer, as defined in section 152(c), who is under age 17. Sec. 24(c)(1). Petitioners claimed.a child tax credit for G.P. for 2010. Because petiti ners have not shown that G.P. was a qualifying child as defined in section 152(c) for that year, they are not entitled to the child tax credit with respect to her. 23 Conclusion 24 25 Petitioners have fafled to prove that they are entitled to dependency exemption deductions with 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 13 1 2 respect! to Ms. Prince and G. P. for 2010. In addition, they have failed to convince the Court that they 3 maintained a household that constituted the principal 4 5 6 7 8 9 place of abode of Ms. Prince or G.P. for more than one-half of 2010. Finally, petitioners have failed to establish that Ms. Prince is a qualifying child for purposes of section 32, which allows an earned income tax credit under certain circumstances, or that G. P. is a qualifying child for purposes of. .section 24(a), 10 which allows a child tax credit under certain circumstances. To reflect the foregoing, decision will be entered under Rule 155. THIS CONCLUDES THE COURT'S ORAL FINDINGS OF FACT AND OPINION IN THIS CASE. (Whereupon, at 2:33 p.m., the above- entitled matter was concluded.) 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 866.488.DEPO www.CapitalReportingCompany.com