TAX COURT OPINION

Case: Loreto P. Biete
Docket Number: 3961-09S
Judge: Colvin
Opinion Type: bench
Filed: 07/27/2010
Pages: 7

y UNITED STATES TAX COURT WASHINGTON , DC 2021 7 LORETO P . BIETE, Petitioner , v . Docket No . 3961-09 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 in the above case before Judge David Gustafson at Honolulu, Hawaii, on June 22, 2010, containing his oral findings of fact and opinion rendered at the conclusion of the trial . In accordance with the oral findings of fact and opinion, decision will be entered for respondent . (Signed) David Gustafson Judge Dated : Washington, D .C . July 27, 2010 SERVED Jul 28 2010 I 2 1 Bench Opinion by Judge David Gustafson - June 22, 201 0 2 LORETO P . BIETE Docket No : 3961-09 S 3 THE COURT : The Court has decided t o 4 render oral Findings of Fact and Opinion in this case, 5 and the following represents the Court's oral Findings 6 of Fact and Opinion . The oral Findings of Fact and 7 Opinion shall not be relied on as precedent in any 8 other case . 9 This Bench opinion is made pursuant to 10 the authority granted by section 7459(b) of th e 11 Internal Revenue Code of 1986, as amended, and Rule 12 152 of the Tax Court Rules of Practice and Procedure . 13 By a statutory notice of deficiency dated 14 December 19, 2008 (Ex . 2-J), the IRS determined a 15 deficiency in the Federal income tax of petitioner 16 Loreto P . Biete for the year 2006, in the amount of 17 $2,990 . The issues in dispute are Mr . Biete' s 18 entitlement to : (1) dependency exemptions for his two 19 daughters ; and (2) the section 24 child tax credit for 20 them . For the reasons explained hereafter, we wil l 21 sustain the deficiency assessed against Mr . Biete . 22 This case was tried in Honolulu, Hawaii 23 on June 21, 2010 . Only Mr . Biete testified . The 24 parties' Stipulation of Facts and First Supplemental 25 Stipulation of Facts with Exhibits 1-J through 5-P , Heritage Reporting Corporation (202) 628-4888 s' 11 3 1 were received into evidence . We find as follows : 2 Findings of Fact . 3 Mr . Biete serves this country in th e 4 military, in which he has made his career . In 1995 he 5 began living with a woman named Irene, and the couple 6 had two daughters . The couple broke up in March 2003 . 7 Mr . Biete was stationed in Korea, and when he retur n 8 in October 2005 his daughters were living with thei r 9 maternal grandmother . Irene was living elsewhere with 10 her husband . The grandmother told Mr . Biete thing s 11 about Irene's interaction with their daughters and her 12 failure to care for them that concerned Mr . Biete . He 13 took the girls with him to Texas, where he wa s 14 assigned to a position at Fort Hood . Mr . Biete wa s 15 soon to be deployed to Kuwait and Baghdad, and he made 16 a plan for the girls to be cared for by friends i n 17 Nashville, at Mr . Biete's expense . 18 However, Irene and her husband went to 19 Nashville, got the daughters, and took them to Hawaii 20 in late June 2006 . The daughters lived with Irene the 21 rest of 2006, but Mr . Biete continued to pay for the 22 girls' support, and we assume for purposes of thi s 23 decision that he provided more financial support than 24 Irene did . 25 Irene claimed both girls as dependents on Heritage Reporting Corporation (202) 628-4888 4 1 . her 2006 tax returns . (Stip . 9) . On his 2006 tax 2 return (Ex . 1-J), Mr . Biete likewise claimed both 3 daughters as dependents and claimed the child ta x 4 credit and the additional credit . (Stip . 4-7 .) In 5 its notice of deficiency (Ex . 2-J), the IRS disallowed 6 the dependency exemptions and credits and determine d 7 a deficiency of $2,990 . Mr . Biete filed this petition 8 in March 2009, at which time he resided in Hawaii . 9 (Stip . 1) . 10 Opinion . 11 The IRS's determination is presume d 12 correct, and generally the taxpayer bears the burden 13 to prove his entitlement to the exemptions and credits 14 he claimed . Rule 142(a) ; Welch v . Helvering, 290 U .S . 15 111, 115 (1993) . Mr . Biete has not contended that the 16 burden of proof has shifted under section 7491(a), and 17 the record does not suggest any basis for such a 18 contention . 19 The tax benefits at issue here depend on 20 the taxpayer's having a "qualifying child", th e 21 definition of which includes the child's living with 22 the taxpayer who claims the benefit . As for th e 23 dependency exemption, section 151(a) of the Internal 24 of Code provides for a deduction for certain exemption 25 amounts . Section 151(c) allows for an exemption fo r Heritage Reporting Corporation (202) 628-4888 1 "each individual who is a dependent (as defined i n 2 section 152)" . The general definition requires that, 3 in order to be a "dependent" of the taxpayer, a child 4 must have "the same principal place of abode as th e 5 taxpayer for more than one-half of" the tax year . 6 Sec . 152(c) (1) (B) . 7 As for the child tax credit, section 24 8 provides for a tax credit for "each qualify child of 9 the taxpayer" ; and the statute looks to that sam e 10 definition . That is, section 24(c)(1) provides that 11 11[t]he term ' qualifying child' means a qualifyin g 12 child of the taxpayer (as defined in section 152(c))" . 13 Thus, the child tax credit, like the dependenc y 14 exemption, depends on a child's sharing "the sam e 15 principal place of abode as the taxpayer for more than 16 one-half of" the tax year . 17 Mr . Biete's daughters were in the physical 18 custody of their mother for more than 6 months of 2006 19 and did not share Mr . Biete's abode . Thus, unde r 20 these provisions, Mr . Biete is not eligible for the 21 dependency exemptions or the child tax credit . 22 These provisions have an exception that 23 applies to some non-custodial parents, but Mr . Biete 24 does not qualify for this exception . Section 152(e) 25 includes a "Special Rule for Divorced Parents, Etc . " Heritage Reporting Corporation (202) 628-4888 6 1 That rule could apply to Mr . Biete if "the custodial 2 parent [i .e ., Irene] signs a writte n 3 declaration . . . that such custodial parent will no t 4 claim such child as a dependent for any taxable year 5 beginning in such taxable year", sec . 152(e)(2)(A), 6 and if "the noncustodial parent [i .e ., Mr . Biete ] 7 attaches such written declaration to the noncustodial 8 parent's tax return", sec . 152(e)(2)(B) . The IRS has 9 prescribed Form 8332 as the form for the writte n 10 declaration . If a non-custodial parent successfully 11 invokes this exception, then he can obtain th e 12 dependency exemption for the child and the child tax 13 credit . 14 Mr . Biete does not qualify for the 15 exception because, as far as the record shows, he did 16 not attach to his return a declaration from Iren e 17 stating that she would not claim the daughters as her 18 dependents (and, in fact, she did claim them) . 19 This may feel like an unfair outcome to 20 the noncustodial parent who provides most or all of 21 the financial support for a child but cannot obtain 22 the cooperation of the custodial parent . However, in 23 section 152 Congress has created several objectiv e 24 tests that draw bright 'lines . The alternative would 25 be rules that are sensitive to the wide variety o f Heritage Reporting Corporation (202) 628-4888 7 1 family circumstances, but such sensitive rules would 2 be difficult for the IRS and the courts to administer, 3 and such sensitive rules would effectively requir e 4 Government intrusion into delicate family matters and 5 intractable human problems . This may be why Congress 6 stopped where it did in making exceptions to th e 7 "place of abode". requirement of section 152(c)(1)(B) . 8 In .any event, Mr . Biete is not eligible for the tax 9 benefits at issue here . 10 The Court is bound to apply the law as 11 Congress enacted it . We do not have the power t o 12 address sympathetic circumstances by crafting ad hoc 13 remedies . The Court cannot award the dependenc y 14 exemption to redress an injustice in a child custody 15 arrangement, and a tax benefit would be a poor and 16 utterly inadequate remedy for that problem . 17 Consequently, the deficiency as determined 18 by the respondent will be sustained . 19 This concludes the Court's oral Findings 20 of Fact and Opinion in this case . 21 (Whereupon, at 9 :28 a .m ., the bench opinion in 22 the above-entitled matter was concluded . ) 2 3 2 4 25 Heritage Reporting Corporation (202) 628-4888