TAX COURT OPINION

Case: Carlo A. Benavides
Docket Number: 619-17S
Judge: Leyden
Opinion Type: bench
Filed: 02/16/2018
Pages: 13

SYM UNITED STATES TAX COURT WASHINGTON, DC 20217 CARLO A. BENAVIDES, Petitioner, v. ) ) ) ) Docket No. 619-17S. 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 petitioner and to respondent a copy of the pages of the transcript of the trial in the above case before Special Trial Judge Diana L. Leyden at San Diego, California, on February 1, 2018, containing her 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 for petitioner. (Signed) Diana L. Leyden Special Trial Judge Dated: Washington, D.C. February 16, 2018 SERVED Feb 16 2018 Bench Opini.on by Special Trial Judge Diana L.. Leyden· February 1, 2018 Carlo A. Benavides v. Commissioner of Internal Revenue Docket No. 619-17S 3 THE COURT HAS DECIDED TO RENDER ORAL FINDINGS OF EACT AND. OPINION IN THIS. ÇASE, AND THE FOLLOWING REPRESENTS THE COURT ' S ORAL FINDINGS OF ÉACT 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 Practice and Procedure. This proceeding was heard as a Small Tax Case 3 ªnt to the provisions of section 7463 of the Internal Revenue Code of..1986, as amend.ed, and Rules 1 2 3 4 5 6 8 9 10 11 12 13 14 15 170 through 175 of the Tax Court Rules of Practice and 16 Procedure. 17 .. This bench opinion is made pursuant to the 18 .. authority granted by section 7459 (b) of the Internal 19 Revenue Code of 1986, as amended, and Rule 152 of .the 20 Tax Court Rules of Practice and Procedure. . . . 21 22 Hereinafter in , this bench opinion, all section references. are.,to the Internal Revenue Code, as. 23 amended, in effect at all relevant times, and all Rule 24 references .are to the Tax Court Rules of Practice and 25 Procedure. (973)406-2.250|ope ti ns elËÌ(cid:0)540eSáetwww,escribers.net 1 2 3 4 5 6 7 8 9 The Court uses the term "Internal Revenue Service" or "IRS" to refer to administrative actions taken outsidé of thesé proceedings. The Court uses the term "respondent" to refer to the Commissioner of Internal Revenue Service, who is Èhe head of the IRS and is respondent in this case, and to refer to actions taken in connection with this case. Petitioner's minor daughter is identified in this bench opinion by initials. Seè Rule 27.(a) (3) . 10 Petitioner's daughter who at the time of trial was ever 11 12 18 or older is identified by her first nante. The trial of this case was conducted on 13 January 31, 2018, in San Diego, California. Shahin 14. Rahimi was recognized by the Court for a limited 1 appeatance on behalf of petitioner for purposes of . 16 assisting petitiónér at trial. Ivfin Chan appeared on (cid:16)042 1 1 1 .2 2 22 23 behalf of respondent. In a notice of deficiency dated October 12, 2016, the IRS determined a deficiency in petitioner's 2014 Federal income tax of $3, 768. The issues for decision by the. Court are: (1) whether petitioner is entitled to claim a dependency exemption deduction with respect to his daughters, 24 Vanessa and V.B., (2) whether petitioner is entitled to 2 claim a child tax credit and additiorïal child tax bers 1 credit with respect to Vanessa and V.B., and (3) (cid:16)042 2 whether petitioner is entitled to claim an earned income 3 4 5 6 .7 8 9 credit with respect to Vanessa. and V.B. for 2014. . The parties agree that if during 2014 petitioner proves that Vanessa and V.B. spent 186 or more- hights (i.e., more thañ one half of the nights in 2014) with petitioner, then they were petitioner's qualifying children for 2014 and petitioner was entitled to claim two dependency exemption deductions, 10 the child tax credit and.additional child tax credit, 11 12 and the earned income credit with respect to them for 2014. . The Court finds that Vanessa and VB did spend 13 more than 186 nights with petitioner during.2014 and 14 15 1 1 18 19 20 21 22 äre qualifying children. Background Some of the facts are stipulated and are so found. The first stipulation of facts and the attached exhibìts are incorporated herein by this reference. Petitioner.resided in the State of California at the time that the petition was filed with the Court. Petitioner timely filed a Federal individual income tax return for 2014. On his 2014 tax return 23 petitionere claimed two dependeñcy exemption deductions 24 for Vanessa and V.B. and the child tax credit, 25 additional child tax credit, and earned income credit 3) Ò 2 0 0 eratiOf15@esÈriberLhe WmNrÁ5dibetLitet 1 with respect to Vanessa and V. B. 2 3 Petitioner and Maria Ruiz the. mother of .Vanessa and V.B. had many disagreements about the 4 . amo.urít of time both children would spend with each of 5 6 7 8 9 10 them. In 2008 the children were removed froin Ms. Ruiz' custody because she did not answer a court order. In response to that iricident, Ms. Ruir and petitioner participated in mediation that set. the days and nights the children would st.ay with them. In 2011 they participated in another mediation 11 that changed the schedule. The parties entered into an 12 13 agreement after that mediation session. The agreement contained very specific rules detailing with which 14 parent the children would stay during the week, during 15 16 1 1 1 20 21 22 school vacations, during holidays, and on each parent's birthday. Petitioner and Ms. Ruiz did not follow this agreement in that petitioner would exceed the number of nights he had the children and on at least one occasion that Ms. Ruiz also exceeded the agreement. Neither party asked a court or mediator to enforce the agreement or to forinally change it. The IRS audited petitioner's 2010 tax return,. 23 in which he had also claimed dependency exemption 24 deductions for his daughters. After that examination, 2S petitioner gèt into the habit of keeping notes on a 7 1 2 3 4 5 6 7 8 9 calendar in his bedroom to document the nights his daughters stayed with him. He would make a note either on the day they s.tayed or shortly thereafter. At the. end of the year petitioner's girlfriend of fourteen years, Melodee Felbinger who lived with petitioner since 2005, would take the notes from petitioner's. calendar and transfer them to a cleahër- copy. Ms. Felbinger used a.blue marker to indicate the days petitioner's daughters stayed·overnight with 10 petitioner. These were the.days agreéd upon under the 11 agreement but also included other days that the 12 daughters.stayed with petitioner during school I 13 14 vacations or when petitioner, Ms..Éelbinger and the daughters took vacations. The additional days were 15 .also nòted that were not covered under .the agreement. 16 17 It was petitioñer's understanding that he had to give the mother 30 days notice that he was taking a vacation 18 with the children. The mother did.not make any 19 objection. . 20 21 Ms. Felbinger used a yellow marker to indicate any other additional days the children stayed with 22 petitioner, which consisted of days petitioner took the 23 children to doctor's appointments after which théy .24 would stay overnight with petitioner. Peti-tioner and 25 Ms. Felbinger documented the days Vanessa and V.B. stayed overnight with petitioner in 2014 consistent with this method. ..The mother disputed that the daughhers stayed overni ht after.noted doctor's appointments. However, thé mother did not take the. children to these 8 appointments in 2014. According to petitioner's calendar, during 2014 Vanessa and V.B. stayed with him 192 nights that ,were agreed to under the agreement. The children shared a room when they stayed overnight. with 1 2 3 4 5 6 7 8 9 10 petitioner. Five other children lived with petitioner 11 12 13 14 15 16 and Ms. Felbinger in their home during 2014. . Discussion Generally, the Commissioner's determination of a deficiency is presumed correct, and the taxpayer bears the.burden of proving it incorrect. See Rule 142(a); Welch v. Helvering.. 290 U.S. 111,115 (1933). 17 Moreover, deductions are a matter of legislative grace, 18 and the taxpayer bears the burden of proving 19 entitlement to any deduction claimed. INDOPCO. Inc. v. 20 Commissioner. 503 U.S. 79. 84 (1992); New Colonial Ice 21 Co. v. Helvering. 292 U.S. 435. 440 (1934). 22 Under section 7491(a). the burden of proof may 23 shift to the Commissioner if the taxpayer produces 24 25 credible evidence with respect to any relevant factual issue and meets other requirements. Petitioner argued 7 to 2256föper ms scHbéañet ww.eseitWisMet . that section 7491(a) applies. The Court finds that . petitioner had not established that its requirements are met. The burden of proof remains with petitioner. The Court finds that petitioner has met his burden of 9 . proof. A. Dependency Exemption Deductions A taxpayer is entitled to deduct- an exemption for each individual who is a dependent of the taxpayer for the taxable year. Sec. 151(a), (c). A dependent 1 2 3 4 5 6 7. 8 9 10 as used in sectIon 151 means the taxpayer's qualifying 11 child or qualifying relative. Sec. 152 (a) . .22 Section 152 (c) (1) .defines. a qualifying child 13 as a child who (1) bears a specified relationship to 14 15 the taxpayer, (2) who lived with the taxpayer for more than one-half of the tax year at issue, and (3) who did 16 not provide more than one-half of his or her own 1 18 19 supp.ort during the year. These requirements can be loosely stated as the relationship test, the residency test, the age test, and the support test. A daughter 20 of thë taxpayer satisfies the relationship test. .Séc. 21 152 (c) (2) . To meet the age test, the qualifying child 2 must be younger than the taxpayer and either be less 23 than 19 ye.ars old or a studént who is less than 24 24 25 years old, or permanently and totally disabled. Sec. 152 (c).(3) . The requirements are in the conjunctive and . 10 1 .2 3 4 5 6 7 8 9 all must be satisfied. Respondent concedes that petitioner.satisfies the relationship test, age test, and.suppo.rt test with respect to Vanessa and V.B. but contends ,that petitioner fails to meet the residency test with respect to bot.h of his childreri. Clearly, petitioner and Ms. Ruiz had a very acrimonious relationship. Petitioner, Ms. Felbinger and Ms. Ruiz, the mother of the childrén teskified. ) 10 The parties orally moved to exólude the other party's 11 witness - Ms. Felbinger for petitioner, and Ms. Ruiz, 12 13 for respondent, from the courtroom while petitioner testified. The Court granted that oral motion. When 14 Ms. Felbinger testified as a witness for petitioner, 15 Ms. Ruiz was still excluded from the courtroom. 16 17 18 Petitioner and Ms. Felbinger testified consistently that the calendar they prepared reflected the actual time that the children stayed overnight with 19 them during 2014. They testified åbout vacations théy 20. took with the children in 2014, and Ms. Felbinger 21 22 23 24 testified that she was a stay at home mother during 2014. In contrast, Ms.. Ruiz's. re.sponses were vague; she answered several times that she did not remember. 2 Ms. Ruiz also testified .that to the extent that . 11 petitioner varied from the agreement, she did not do anything to enforce the terms of the agreement or to recöup the days. She also testified,that she on at least one occasion varied froin the agreement. .She also testified that she did not keep any calendar or record of the children's visits with her. Our charge as. the trier of fact is, in part, to review the credibility of witnesses and the reliability of evidence for purposes of finding 1 2 3 4 5 6 7 8 9 10 disputed fa.cts. In discharging that duty, we observe . 11l 12 the truthfulness, candor, and demeanor of each witness to -evaluate his or her testimony. See Garavaglia v. 13 Commissioner, T. C. Memo. 2011-228, 2011 Tax Ct. Memo 14 LEXIS 226; HIE Holdings. Inc. v. Commissioner, T.C. 1S Memo. 2009-130, 2009 Tax Ct. Memo LEXIS 142. The 16 evidence is weighed, necessary inferences are drawn, 1 and disputed facts are resolved with a view toward 18 ascertaining the truth. 19 The Court finds Ms. Ruiz's testimony in 20 certain material respects not credible and cönclusory, 21 uncorroborated, and/or self-serving.·. While she 22 testified that she would never have allowed petitioner 2 to have the childrett overnight on her designated nights 24' under the agreement, she also testified that she had 2 allowed petitioner to informally modify the agr.eement . 12 1 2 3 4 5 6 7 8 9 by exceeding his .designated time with the children. She also testified that she never took vacation with her daughters. We shall not rely on the testimony of Ms. Ruiz to establish her position with respect to the number of nights the children spent with petitioner. See e.g., Tokarski v. Commissioner, 87 T C. 74, 77 (1986). In contrast, the Court finds the testimony of petitioner and Ms. Felbinger to be credible and 10 reliable. Their testimony cor.roborates the notation on 11l the stipulated calendar that both Vanessa and V.B. 1 stayed with petitioner for 192 nights during 2014, the 13 nights reflected in the calendar to which the parties 14 13 16 1 18 stipulated as regular "days" that petitioner had custody. Accordingly, petitioner satisfied the residency test with respect to Vanessa and.V.B. 2014 and has proven that his daughters were his qualifying 1 children for 20s14. Petitioner is therefore entitled to 20 21 22 23 24 25 two dependency exemption deductions for his daughters for 2014. B. Credits Section 24 (a) allows a taxpayer a child tax credit, a portion of which may be refundable as an additional child tax credit, for each qualifying child (cid:16)042 13 of the taxpayer. The term "qualifying child" means a qualif.ying child of the taxpayer as defined in sectio.n 152(c) who is under age 17.. Sec. 24(c) (1). Section 32 permits taxpayers with low earned income who qualify as an "eligible individual" to claim the earnéd income credit. Sec..32(c) (1) (A). The term "qualifying child" has the same meaning for purposés of both section 152(c) and section 32. Sec. 32(c)(3). Both children satisfied the definition of qualifying child and petitioner qualified to claim the earned income credit with respect to both of them. As discusséd above, the parties agreed that petitioner was entitled to claim the child tax .credit, including the additional child tax credit,·and the earned income credit with respect to Vanessa and V.B. for 2014 if petitioner proved that his daughters lived with him more than one half of 2014 (i.e., that they were his qualifying. children). Having found that Vanessa and V.B. were petitioner's qualifying children. for 2014, the Court holds that petitioner is entitled to the claimed child tax credit, additional child tax 1 2 3 4 5 6 7 8 9 1 1 12 13 14 1S 16 17 18 19 21 21 . 22 credit, and earned income credit for 2014 with respect 23 to his daughters. In order to give effect to our disposition of 25 . the disputed issues, a decision will be entered for . 1 2 3 4 5 6 7 9 10 12 13 1 15 1. 17 18 20 22 2 2 2 petitioner. THIS CONCLUDES THE COURT'S ORAL FINDINGS OF FACT AND OPINION IN THIS CASE. 14 (Whereuporí, at 11:15 a.m., the above-entitled matter was concluded.) (cid:16)042 cribers