TAX COURT OPINION

Case: Jeffrey Scott McCusker
Docket Number: 7369-11S
Judge: Carluzzo
Opinion Type: bench
Filed: 03/29/2012
Pages: 12

UNITED STATES TAX COURT 20217 WASHINGTON, D . C . JEFFREY SCOTT MCCUSKER, Petitioner, v. COMMISSIONER OF INTERNAL REVENUE, Re spondent . ) ) ) ) ) ) ) ) ) Docket No. 7369-11S O R D E R Pursuant to Rule 152(b), Tax Court Ruïes of Practice and Procedure, it is ORDERED that the Clerk of the Court shall transmit herewith the pages of the to petitioner and to respondent a copy of transcript of Trial Judge Lewis R. Carluzzo at Philadelphia, Pennsylvania, on March 14, 2012, containing his oral findings of fact and opinion rendered at the above case before Special the conclusion of trial. the trial of In accordance with the oral findings of fact and opinion, decision will be entered for respondent. (Signed) Lewis R. Carluzzo Special Trial Judge Dated: Washington, D.C. March 29, 2012 SERVED MAR 3 0 2012 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 3 Bench Opinion by Special Tríal Judge Lewis R. Carluzzo McCusker v. Commissioner Docket No. 7369-11S March 14, 2012 THE COURT: 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 (bench opinion). This proceeding for the redetermination of a deficiency is a small tax case subject to the provisions of section 7463 of the Internal Revenue Code of 1986, as amended, and Rules 170 through 175 of the Tax Court Rules of Practice and Procedure. 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 and Procedure. Except as provided in Rule 152(c) this bench opinion shall not be reliedÍupon as precedent. Unless otherwise noted, subsequen¢ section references contained in this bench opinion are to sections of the Internal Revenue Code of 1986, as amended, in effect for 2008. Jeffrey Scott McCusker :is self-represented in this case. Jayne M. Wessels nppeared on behalf of respondent. In a notice of deficiency mailed to Heritage Reporting Corporation (202) 628-4888 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 4 petitioner on December 27, 2010 (notice), respondent determined a $3,122 deficiency in his 2008 Federal income tax. The issues for decision are: (1) whether petitioner is entitled to a dependency exemption deduction for his minor child; (2) whether petitioner qualifies as a head of household; and (3) whether petitioner is entitled to a child tax credit. Some of the facts have been stipulated and are so found. Petitioner was a resident of Pennsylvania at the time the petition was filed. Petitioner and Dianne Pfeffer (Ms. Pfeffer) began living together in 2004 and continued to do so until they went their separate ways at some point during 2007. In the meantime, they became the parents of a child, G.M., born in 2007 (For privacy reasons, the Court refers to minor children by their initials.) See Rule 27 (a) (3)). Later that year they agreed in writing to share custody of G.M. (custody agreement). The custody agreement, eventually incorporated into an order of a Pennsylvania court having jurisdiction over such matters (custody order), also sets forth the "custody schedule", which allows physical custody to be with petitioner for slightly less than one-half of the year, which is what happened in 2008. Heritage Reporting Corporation (202) 628-4888 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 5 Neither the custody agreement nor the custody order make specific reference to which of G.M.'s parents should be entitled to treat the child as his or her dependent for Federal income tax purposes. Nevertheless, it is cl.ear that the child support obligation imposed upon petitioner proceeds as though he would be entitled to do so. This is because petitioner's support obligation is computed with reference to his and Ms. Pfeffer's net monthly income. Under applicable Pennsylvania procedures, Federal income tax withholdings are allowable to reduce gross monthly income to net monthly income. The lower the individual's monthly Federal income tax withholdings, the higher the individual's net monthly income, which in turn and all other things being equal, would result in a higher child support obligation for the individual. The manner in which petitioner's net monthly income has been computed in the custody order for purposes of his child support obligation presumes that he would claim a dependency exemption deduction for G.M. The computation of petitioner's support obligation also shows that a portion of that obligation is attributable to day care expenses for G.M. And that's what petitioner did on his timely Heritage Reporting Corporation (202) 628-4888 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 filed 2008 federal income tax return (return). Also on the return, and as relevant here: (1) petitioner computed his taxable income taking into account the standard deduction applicable to a head of household; (2) claimed a credit for child care expenses (child care credit); and (3) claimed a child tax credit. Petitioner attached a document entitled "Tax Detail Report" (report) to the return. Except for minor variances between amounts shown øn the report and amounts shown on the custody ordër, the report shows the extent to which petitioner's :net monthly income was computed after the allowance of Federal income tax withholdings assuming that he was entitled to a dependency exemption deduction for G.M. The report is not signed by either petitioner or Ms. Pfeffer. As it turned out, Ms. Pfeffer also claimed a dependency exemption deduction for G.M. On her 2008 Federal income tax return. In the notice respondent: (1) changed petitioner's filing status from head of household to single and appropriately adjusted (reduced) the standard deduction; (2) disallowed the dependency exemption deduction claimed;for G.M.; (3) disallowed the child care credit, and (4) disallowed the child tax credit. Petitioner now concedes his entitlement Heritage Reporting Corporation (202) 628-4888 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 7 to the child care credit, and we turn our attention to the 'other adjustments made in the notice that give rise to the issues here in dispude. Because of its consequence to the other issues in the case, we'll start with petitioner's entitlement to a dependency exemption deduction for G.M. In general, a taxpayer jis entitled to an additional exemption deduction for each individual who is a dependent of the taxpayer for the taxable year. Sec. 151 (a), (c). In general, the term "dependent" as used in section 151 and elsewhere in the Internal Revenue Code, means a qualifying ¡child or a qualifying relative. Sec. 152(a), (c) and (d). G.M. does not fit within the definition of petitioner's qualifying child because G.M. did not have the same principle place of abode as petitioner for more than one half of 2008. Furthermore, under the circumstances, we need not consider whether G.M. fits wiithin the definition of petitioner's qualifying relative under section 152(d) (1). Whether G.M. fits within either definition is not determinative here. Because petitioner and Ms. Pfeffer did not live together at Ânytime during the last six months of 2008, special rules apply. Those rules are embodied in section 152 (e) and its Heritage Reporting Corporation (202) 628-4888 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 8 corresponding regulation. If, as here, the special rules of section 152(e) apply to determine which parent is entitled to a dependency exemption deduction for the parents' child or children, then, in general, the deduction is allowable to the "custodial parent". For purposes of section 152(e), the custodial parent means the "parent having custody for the greater portion of the calendar year". Sec. 152(e) (4) (A). This definition is further refined in the regulations, which provide that the custodial parent is the parent "with whom the child resides for the greater number of nights during the calendar year". Sec. 1.152-4 (d) (il), Income Tax Regs. The "noncustodial" (as far as the Court can tell, a word that exists only in the Internal Revenue Code and the Commissioner's regulations) parent is defined simply as "the parent who is not the custodial parent". Sec. 152(e) (4) (B). There are exceptions to this general rule, only one of which is relevant hete. The relevant exception provides that the noncustodial parent is entitled to a dependency exemption deduction for the child only if the custodial parent "signs a written declaration (in such manner and form as the Secretary may by regulations prescribe) that such custodial Heritage Reporting Corporation (202) 628-4888 1 2 3 4 5 6 7 8 9 10 11 12. 13 14 15 16 17 18 19 20 21 22 23 24 25 9 parent will not claim such child fas a dependent for any taxable year", and that written declaration is attached to the noncustodial parent's Federal income tax return for the year in question. Sec. 152(e) (2) (A). The regulations provide that a taxpayer can satisfy the "written declaration" requirement by obtaining a Form 8332, Release/Revocation of Release of Claim to Exemption for Child by Custodial Parent, from the custodial parent. See section 1.152-4 (e) (ii), Income Tax Regs. That did not happen here. But the "written declaration" requirement can also be satisfied if the taxpayer submits a document that complies or conforms in substance to a Form 8332. Id. Because petitioner agrees that he was not G.M.'s custodial parent during 2008, and because there was no Form 8332 attached to the return, petitioner's entitlement to a dependency exemption deduction turns on whether the report is a document that complies or conforms to the substance of a Form 8332. According to petitioner, it is;. according to respondent, it is not. As petitioner views the matter, the report, as well as the circumstances surrounding the computation and allocation of his support obligation Heritage Reporting Corporation (202) 628-4888 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 10 for G.M., establish, if onlý implicitly, that he and not Ms. Pfeffer should be entitled to claim a dependency exemption deduction for G.M., at least as long as the custody order and his support obligations remain in effect. Petitioner acknowledges that no express language to that effect appears in any of the relevant documents created at the time custody and support consideration were under discussion. Respondent considers the implications of the report irrelevant. According to respondent, the report does not compl~y or conform to the substance of a Form 8332 for a variety of reasons . We agree with respondent, if only because the report is not signed by Ms. Pfeffer. In Miller v. Commissioner, 114 T..C. 184 (2000), aff'd on other grounds sub nom. Loveiov v. Commissioner, 293 F.3d 1208 (1|Oth Cir. 2002), we held that a court order allocating the dependency exemption deduction for the taxpayer's child to the taxpayer did not comply or conform to the substance of a Form 8332 because the court order was not signed by the child's custodial parent. If the express terms of a court order that awards a dependency exemption deduction to the noncustodial parënt are rendered ineffective for Federal income tax purposes because the custodial parent did not sign the court order, Heritage Reporting Corporation (202) 628-4888 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 . 11 then for the same reason the implicit terms of a court order to he same end are equally as ineffective. . Me understand that Ms. Pfeffer did sign the custody agreement, and we further understand that the shared custody schedule plays a significant role in the amound of child support ipetitioner is obligated to pay, but ås to its provisions that are relevant here, the custody agreement.speaks only to the shared custody schedule, not to petitioner's support obligation. Ms. Pfeffer's signature on the custody agreement does not otherwise substitute for the lack of her signature on. the report. Because the report, even though attached to the returù, does not satisfy the requirement of a "written declaration" as that term is used in section 152(e) (2) (A), the exception to the general rule allowing the dependency exe ption deduction to G.M.'s custodial parent does not apply. It follows that petitioned is not entitled to a dependency exemption deduction for G.M. for the year in issue, and respondent's disallowance of that deduction is sustained. As noted, G.M. does not fit within the definition of petitioner's qualifying child within the meaning of section 152(c). That being so, petitioner Heritage Reporting.Corporation (202) 628-4888 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 12 is not entitled to a child tax credit for G.M., because G.M. is not petitioner's qualifying child for purposes of that credit. See section 24 (a), (c). Furthermore, and if only because G.M. does not fit within the definition of petitioner's qualifying child within the meaning of section 152(c), petitioner does not qualify as a head of household. See section 2 (b) (1) (A) (I) . It follows that petitioner is not entitled to a child tax credit for G.M, and petitioner does not qualify as a head of household. Respondent's adjustments consistent with those findings are sustained. In closing we think it appropriate to note that we expect that petitioner will ·consider the foregoing to be unfair when his increased 2008 Federal income tax liability is measured against the reality that his child support obligation for G.M., in all likelihood, would have been lower if the determination of that obligation took into account the Federal income tax:advantages Ms.. Pfeffer enjoyed by claiming a dependency exemption deduction for G.M. We sympathize with him on the point, however, his remedy, to the extent that he is entitled to one, lies within the Pennsylvania system designed to address such Heritage Reporting Corporation (202) 628-4888 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 13 matters and not with this Court. To reflect the foregoing, decision will be entered for respondent . This concludes the Court ' s oral f indings of fact and opinion in this case. (Whereupon, at 10:46 a.m., the bench opinion in the above-entitled matter was concluded.) // // // // // // // // // // // // // // // // // // Heritage Reporting Corporation (202) 628-4888