TAX COURT OPINION

Case: David B. & Sharon J. D'Amours
Docket Number: 10435-04S
Judge: Goldberg
Opinion Type: summary
Filed: 02/16/2006
Pages: 14

ADM. RECORDED . S RVICE | CAL. STAT. S. T. JyDGE FILES T.C. Summary Opinion 2006-26 UNITED STATES TAX COURT DAVID B. AND SHARON,J. D'AMOURS, Petition rs y_. COMMISSIONER OF INTERNAL REVENUE, Respon ent Docket No. 10435-04S. . Filed February 16, 2006. David B. and Sharon J. D' Amours, pro sese. Frank W. Louis, for respondent. 6 GOLDBERG, Special Trial Judcre: . This case wa heard pursuant to the provisions of section 7463 of the Internal Revenue Code in effect at the time the petition w s filed. The decision to be entered is not reviewable by any o her court, and this opinion should not be cited as authority. U less otherwise indicated, subsequent section references are to t e Internal Revenue Code in effect for the year in issue, and all Rule references are to the Tax Court Rules of Practice and Procedure. RVED FEB 1 6 2006 - 2 - Respondent determined a deficiency in petitioners' Federal income tax of $3,630 for the taxable year 2002. The issue for decision is whether petitioners are entitled to claim dependency exemption deductions for David B. D'Amours, Jr., ND, and BD.1 Background Some of the facts have been stipulated and are so found. The stipulation of facts and the attached exhibits are incorporated herein by this reference. Petitioners resided in Feeding Hills, Massachusetts, on the date the .petition was filed in this case. On August 22, 1981, petitioner David B. D'Amours (petitioner) and Teresa Marie Pond (Ms. Pond), petitioner's former wife, were married in Southwick, Massachusetts. During the marriage, petitioner and Ms. Pond had three children: David B. D'Amours,. Jr., born in 1981, ND, born in 1987, and BD, born in 1990. Petitioner and Ms. Pond were divorced in 1998.2 Petitioner and Ms. Pond's divorce was granted on March 12, 1998, by a Judgment of Divorce Nisi. A Marital Separation Agreement (separation agreement), which was incorporäted into the Judgment of Divorce Nisi, was signed by petitioner and Ms,. ¹The Court uses only the minor children's initials. 2After his divorce from Ms. Pond, petitioner married petitioner Sharon J. D'Amours on Oct. 9, 1999. Pond on March 12, 1998. The separation agreement states, in - 3 - pertinent part, as follows: THE PARTIES Article I a. This Agreement is made this 12th day of March, 1998 by and between TERESA D'AMOURS [Ms. Pond), who resides at 1393 Piper Ro.ad, West Springfield, Massachusetts, (hereinafter called the Wife), and DAVID D'AMOURS [petitioner], who resides at 717 College Highway, Southwick, Massachusetts (hereinafter called the Husband).. All references in the within Agreement to "parties" shall mean the above-named Husband and Wife. RECITALS ARTICLE II A. Massachusetts on August 22, 1981. The Husband and Wife were married at Springfield, There are presently three (3) minor children of B. the marriage who are living and dependent upon the parties for support and maintenance, whose names and dates of birth are as follows: David B. D'Amours, Jr. * * * [born in 19 1] * * * * . . . * [ND, born in 1987] [BD, born in 1990] All references in the within Agreement mean the above-named minor children. to children shall * * * * * .* * NOW THEREFORE, IN CONSIDERATION OF THE MJTUAL PROMISES, AGREEMENTS AND COVENANTS HEREINAFTER CONTAINED, THE HUSBAND AND WIFE MUTUALLY AGREE AS FOLLOW3: * * * * * * * - 4 - 13. CUSTODY OF THE CHILDREN - The parties agree that they will share joint legal custody of will consult each other prior to making any major decision concerning each child's medical care, religious upbringing, education, extracurricular activities and travel. children-will make their home with the Wife and the Wife shall have physical custody of the children, and the children. The * * * * * * * 14. VISITS WITH THE CHILDREN - The Husband shall have the right and opportunity to visit with the children at all reasonable times. 15. SUPPORT OF THE CHILDREN - The Husband shall pay to the Wife weekly by wage assignment child support guidelines promulgated by the Commonwealth of Massachusetts. in accordance.with applicable Massachusetts law. in accordance with the child support This provision is subject to modification the sum of $360 as 16. CHILDREN AS DEPENDENTS FOR INCOME TAX PURPOSES - The Wife shall not claim or consider the children as her . dependents for the purpose of filing her annual Federal or State income taxes for any calendar year. execute all documents which the Husband deems necessary to enable him to so claim the children. The Wife shall However, at such time as the.Wife has earned in excess of $20,000 in any calendar year, she may claim one child as her dependent for the purpose of filing her annual forms, and the Husband shall execute all documents necessary to enable the Wife to claim the child as her dependent. tax 17. MEDICAL INSURANCE AND EXPENSES - The Husband shall maintain in full insurance policy for the benefit of time as each child is emancipated and for the benefit of the Wife, plan, as he is able to do so at no additional cost. force and effect his present medical the children until such to the extent permitted by his medical insurance The parties agree to share equally the payment of any uninsured medical, dental, orthodontic, optometric, prescription medicines and mental health care expenses for the minor children. - 5 - Sometime between 1998 and 2002, Ms. Pond rem rried. During taxable year 2002, Ms. Pond, ND, BD, and David B. D'Amours, Jr., lived with her husband and his three children from a previous marriage. During taxable year 2002,' Ms. Pond was he parent with physical custody of the two minor children ND and BD. During the year in issue, the two minor children a d David B. D'Amours, Jr., visited petitioner and sometimes st yed overnight with petitioner; however, there was no regular sch dule of visitation times. The two minor children and Davi B. D'Amours, Jr., resided with Ms. Pond for more than one-half of the taxable year 2002. David B. D'Amours, Jr., attained the age of 21 prior to the end of taxable year 2002. During taxable year 2002 David B. D'Amours, .Jr., was not enrolled in any educational ourses and did not attend any educational institution. During the year in issue, Ms. Pond was employe by Costco Wholesale. Costco Wholesale issued to Ms. Pond a F rm W-2, Wage and Tax Statement, which reflected wages earned of $29,326.24. On or about April 15, 2003, petitioners filed t eir Form 1040, U.S. Individual Income Tax.Return, for the 200 taxable 1 year. Petitioners did not attach a Form 8332, Relea e of Claim to Exemption for.Child of Divorced of Separated Pare ts, or any statement, waiver, or declaration conforming to the ubstance of Form 8332 to their 2002 Federal income" tax return. s. Pond did - 6 - not sign a Form 8332 or any statement or waiver stating that she was releasing her claim to the exemptions for ND and BD. In their 2002 return, petitioners claimed exemption deductions for David B. D'Amours, Jr., ND, and BD. Respondent disallowed the claimed exemption deductions for David B. D'Amours, Jr., ND, and BD. Accordingly, respondent issued to petitioners a notice of deficiency determining a deficiency of $3,630 in petitioners' 2002 Federal income tax. Discussion In general, the Commissioner's determination set forth in a notice of deficiency is presumed correct. Welch v. Helvering, 290 U.S. 111, 115 (1933). In pertinent part, Rule 142(a)(1) provides the general rule that "The burden of proof shall be upon the petitioner". In certain circumstances, however, if the taxpayer introduces credible evidence with respect to any factual issue relevant to ascertaining the proper tax liability, section 7491 places the burden of proof on the Commissioner. Sec. 7491(a)(1); Rule 142(a)(2). Credible evidence is "'the quality of evidence which, after critical analysis, * * * [a] court would find sufficient * * * to base a decision on the issue if no contrary evidence were submitted'".3 Baker v. 3We interpret the quoted language as requiring the taxpayer's evidence pertaining to any factual evidence the Court would find sufficient upon which to base a decision on the issue in favor of the taxpayer.. issue to be See Bernardo v. (continued...) - 7 - Commissioner, 122 T.C. 143, 168 (2004) (quoting Higbee v. Commissioner, 116 T.C. 438, 442 (2001)). Section 7491(a)(1). applies only if the taxpayer complies with substantiation requirements, maintains all required records, and cooperates with reasonable requests by the Commissioner for witnesses, information, documents, meetings, and interviews. Sec. 7491(a)(2). Although neither party .alleges the applicability of section 7491(a), we conclude that the burden of praof has not shifted to respondent with respect to the issue in the present case. Moreover, deductions. are a matter of legislat ve grace and are allowed only as specifically provided by statu e.. INDOPCO, Inc.. v. Commissioner, 503 U.S. 79, 84 (1992); New Colonial Ice Co. v. Helvering, 292 U.S. 435, 440 (1934). 1. ND and BD Section 151(a) authorizes deductions for the exemptions provided by that section. .In particular, section J51(c)(1) provides an exemption for each of a taxpayer's dependents, as defined in section 152, who is a child of the taxpé yer and who has not reached the age of 19 by the close of the taxable year. Sec. 151(c)(1) (B). 3(...continued) Commissioner, T.C. Memo. 2004-199. Section 152(a) (1) defines the term "dependent" to include a - 8 - taxpayer's child, provided that more than half of the child's support was received from the taxpayer or is treated under section 152(e) as received from the taxpayer. In the case of a child of divorced parents, section 152(e)(1) provides as a general rule that the child shall be treated as receiving over half of his or her support from the custodial parent. Section 1.152-4(b), Income Tax Regs., provides that custody "will be determined by the terms of the most recent decree of divorce" if there is one in effect. Thus, in the present case, because Ms. Pond had legal custody as well as physical custody of ND and BD throughout 2002, she was the custodial parent in 2002, and petitioner was the noncustodial parent. Section 152(e)(2) provides an exception to the general rule of section 152(e)(1). Pursuant to that exception, the child shall be treated as receiving more than half of his or her support from the noncustodial parent if: (A) the custodial parent signs a written declaration (in such.manner and form as the Secretary may by regulations prescribe) claim such child as a dependent for any taxable year beginning in such calendar year, and that such custodial parent will not (B) the noncustodial parent attaches such written declaration to the noncustodial parent's return for the taxable year beginning during such calendar year. See sec. 1.152-4T(a), Q&A-3, Temporary Income Tax Regs., 49 Fed. Reg. 34459 (Aug. 31, 1984). The declaration required by section 152(e)(2)(A) must be made either on Form 8332 or on a statement conforning to the substance of that form. Id.; accord Miller v. Cortmissioner, 114 T.C. 184, 189 (2000), affd. sub nom. Loveiov v. Commissioner, 293 F.3d 1208 (10th Cir. 2002). .To meet the requirements of section 152(e) (2), the written declaration, if not made on the official form provided:by the Internal_Revenue Service (IRS), "shall conform to the substance of such form." Sec. 1.152- 4T(a), Q&A-3, Temporary Income Tax Regs., s.upra. The form provided by the IRS, Form 8332, calls for the following information: (1) The name of the child -or children for whom an exemption claim is released; (2) the applicable tax year or years for which the claims are released; (3) the.custodial parent's signature and the date of signature; (4) the custodial parent's Social Security number; (5) the noncustodial parent's name; and (6) the noncustodial parent's Social Securitý number. "The exemption may be released for a single year, for a number of specified years (for example, alpernate.years), or for all future years, as specified in the declaration." Sec. 1.152- 4T(a), Q&A-4, Temporary Income Tax Regs., 49 Fed. Reg. 34459 (Aug. 31, 1984). - 10 - In the present case, Ms. Pond, as the custodial parent, did not sign a Form 8332 or any written declaration or statement agreeing not to claim the exemptions for ND and BD, and no such form, declaration, or statement was attached to petitioners' return for·the year in issue. However, petitioner argues that the separation agreement in the Judgment of Divorce Nisi, which ended hls marriage with Ms. Pond, by its terms grants him the right to claim ND and BD as dependents for Federal and State income tax purposes. We note that even if the provision of the separation agreement regarding dependency exemptions is controlling in this case, Ms. Pond would be entitled to one dependency exemption due to the fact that she earned in excess of $20,000 in the taxable year 2002. Although the separation agreement, by and through its own (cid:16)042 terms, provides that petitioner is entitled to a dependency exemption for one of the claimed minor dependents, it is well settled that State courts by théir decisions cannot determine issues of Federal tax law. See Commissioner v. Tower, 327 U.S. 280 (1946); Kenfield v. United States, 783 F.2d 966 (10th Cir. 1986); Neal v. Commissioner, T.C. Memo. 1999-97; Nieto v. Commissioner, T.C. Memo. 1992-296. We find that the separation agreement, in the present case, does not "conform to the substance" of Form 8332. See sec. - 11 - 152(e) (2); see-also sec. 1.152-4T(a)., Q&A-3, Tempcrary Income Tax Regs., supra. Further, the séparation agreement was not attached to petitioners' 2002 Federal income tax return. Unfortunately, regardless of what is stated in the separation agreement, the law is clear that petitioner is entitled to the child dependency exémption for one of the minor children in 2002 only if he complied with the provisions of section 152(e)(2). Petitioner has .failed in this regard. It follows, therefore, that the exception set forth in section 152(e)(2) does not apply and that the general rule of -section 152(e)(1) does apply. Accordingly, petitioners are'not entitled to deduct dependency exemptions for ND and BD for faxable year 2002. Sec. 152(e)(1); Miller v. Commissioner, supra. 2. David B. D'Amours, Jr. . David B. D'Amours, Jr., attained the age of 2 L prior to the end of taxable year 2002. During taxable year 2002, David B. D'Amours, Jr., was nöt enrolled in any educational courses and did not attend any.educational institution. . If a child has reached the age of majority and is considered emancipated under the laws of the Commonwealth of Massachusetts, neither parent will be considered to have "custody" of that child within the meaning of sectron 152(e)(1) (B). Ferguson v. Commissioner, T.C. Memo 1994-114; see Kaechele v. Commissioner, T.C. Memo. 1992-457. A child - 12 - reaches the age of majority in Massachusetts at 18 years of age. Mass. Ann. Laws ch. 231, sec. 85P (LexisNexis 2000). Once a child is considered emancipated under State law, section 152(e)(1) is inapplicable, and the general rule of section 152(a) is controlling. As previously stated, section 152(a)(1) defines the term "dependent" to include a taxpayer's child, provided that more than half of the child's support was received from the taxpayer. "Support" includes "food, shelter, clothing, medical and dental care, education, and the like." Sec. 1.152-1(a)(2)(i), Income Tax Regs. . The Court notes that to claim David B. D'Amours, Jr., as a dependent, petitioners would have also had to show that David B. D'Amours, Jr.'s, gross income for the 2002 calendar year was less than the exemption amount of $3,000. Sec. 151(c)(1). As shown below, we find that petitioner has not carried his burden of proof in showing either the total support for David B. D'Amours, Jr., for taxable year 2002 or that he provided over one-half of that support as required under section 152(a); therefore, we need not, and do not, decide whether David B. D'Amours, Jr.'s gross income for the 2002 calendar year was less than the exemption amount of $3,000. In determining whether an individual received more than one-half of his or her support from the taxpayer, there shall be - 13 - taken into account the amount of support received from the taxpayer as compared to the entire amount of supp rt which the individual received from all sources. d In ot er words, the support test requires the taxpayer to establish th total support costs for the claimed individual and that he taxpayer provided at least half .of that amount. Archer v. ommissioner, 73 T.C. 963, 967 (1980); see Cotton v. Commissione , T.C. Memo. 2000-333; Gulvin v. Commissioner, T.C. Memo. 1980- 11, affd. 644 F.2d 2 (5th Cir. 1981); Toponce v. Commissioner, T.C. Memo. 1968-101. A taxpayer who' cannot establish the tota amount of . support costs for the claimed individual generally ay not claim that individual as a dependent. Blanco v. Commissi ner, 56 T.C. 512, 514-515 (1971); Cotton v. Commissioner, supra. Petitioner tes.tified that David B. D'Amours, J ., resided with Ms. Pond during taxable year 2002. Petitioner further testified that he provided some support for David B. D'Amours, Jr. However, petitioner did not testify as to any s ecific amounts of support given to David B. D'Amours, Jr., r to the total annual cost of support for David B. D'Amours, r. Petitioner has not carried his burden of proof in sh wing either the total support for David B. D'Amours, Jr.,. for ta able year 2002 or that he provided over one-half of that support as required under section 152(a). Therefore, petitioner is not I _ 14 _ entitled to deduct a dependency exemption for David B. D'Amours, Jr. Respondent' s determination is sustained. Reviewed and adopted as the report of the Small Tax Case Division. Decision will be entered for respondent.