TAX COURT OPINION

Case: Lorenzo T. Maddox
Docket Number: 5549-18
Judge: Gustafson
Opinion Type: bench
Filed: 05/09/2019
Pages: 10

SYM UNITED STATES TAX COURT WASHINGTON, DC 20217 LORENZO T. MADDOX, Petitioner, v. ) ) ) ) Docket No. 5549-18. COMMISSIONER OF INTERNAL REVENUE, Respondent ) ) ) ORDER Pursuant to Rule 152(b) of the Tax Court Rules of Practice and Procedure, it is ORDERED that the Clerk of the Court shall transmit herewith to petitioner Lorenzo T. Maddox and to the Commissioner a copy of the pages of the transcript of the proceedings in the above case before the undersigned judge at Atlanta, Georgia, containing his 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, decision will be entered for the Commissioner. (Signed) David Gustafson Judge Dated: Washington, D.C. May 9, 2019 SERVED May 09 2019 3 1 2 3 4 5 6 7 8 a Bench Opinion by Judge David Gustafson APril 30, 2019 Lorenzo T. Maddox v. Commissioner of Internal Revenue Docket No. 5549-18 THE COURT: The Court has decided to render oral Findings of Fact and Opinion in this case. The following represents the Court's oral Findings of Fact and Opinion, which shall not be relied on as precedent in any other rasp. This Ronch oninion is mado nursuant en rho 10 authority granted by section 7459(b) of the Internal 11 12 13 xevenue coae, ana rax court xu1e 10z. By a statutory notice of deficiency ("SNOD") dated February 14, 2018 (Ex. 1-J), the Internal Revenue 14 Service ("IRS") determined a deficiency in the Federal 15 16 17 la 19 21 22 income tax of petitioner Lorenzo T. Maddox for the year 2016. In dispute is his entitlement to (1) a dependency exemption deduction under section 152, (2) the earned income credit ("EIC") under section 32, (3) head of household status under section 1(b), and (4) greater allowed. Trial of this case was conducted on April 29, 2019, in Atlanta, Georgia. Mr. Maddox represented 23 himself, and DeVon Dunn represented the Commissioner. We 24 find the following facts: 25 crg)Pr (973)406-2250loperations@escribersnet}www.esenbeismet FINDINGS 4 Undisputed income In the year 2016, Mr. Maddox was employed for Part of the year by an entity called Alliance, which paid him wages and withheld Federal income tax and reported those wages and withholding to the IRS. The IRS does not dispute those amounts. Mr. Maddox also received a taxable distribution from Transamerica, from which it withheld Fødpral innomp tax. and thp TRS dnps not disnuto thosp amounts. uaenan APPlying the burden-of-proof principles discussed below, we are unable to find that Mr. Maddox was employed in 2016 by an entity called Daehan. Mr. Maddox seemed to testify that Daehan failed to pay him his wages, and we find that in any event he did not receive wages from Daehan in 2016 and that no Federal withholding was done on his account by Daehan. 1 2 3 4 5 6 7 8 o 10 11 12 13 14 15 16 17 1R 19 Claimed dependent 21 22 23 owned by his grandmother and also lived in by his grandmother and grandfather. He paid them $150 a month to rent a room there, and made no additional contribution to 24 utilities or other household expenses. He received food 25 stamps, which he used to help with the purchase of his c gr)prs 73)406-2250|operations@escribersmet|www.escribersaet 5 1 2 3 4 5 6 7 8 o food. Aaron Forte, Jr., was born in 191/, so in 2016 he turned age 79. Mr. Forte had health problems of some sort, but we lack evidence that would enable us to make any finding about the seriousness of those problems. Mr. Forte was the son of a man who was a friend of Mr. Maddox's mother. Mr. Maddox calls Mr. Forte is stepbrother, but Mr. Forte's father and Mr. Maddox's mothpr wprp not marripd. and Mr. Maddox was vanno ahnnt 10 their relationship (if they had one). For no more than 5 11 montns or zult (see st1p. lite)), Mr. rorte 11vea in a 12 spare bedroom in the house in which Mr. Maddox lived. Mr. 13 Maddox did not pay any extra rent on Mr. Forte's behalf 14 15 16 17 19 19 during that 5 months. 2016 tax return Mr. Maddox hired a paid preparer to prepare his 2016 income tax return. The return he filed (Stip. 3, Ex. 2-J) reports Mr. Forte as a dependent, and claims EIC and head-of-household status. The return also includes ZU 1111u11ttätlo11 deuttL wdye's 11uitt dilu ruiltt vv-z. w1L1111olu111y uy 21 22 23 both Alliance and Daehan, but Mr. Maddox insists he never received wages or a Form W-2 from Daehan, and he does not know how the Daehan-related numbers on the return were 24 derived. 25 criners (973)406-2250|operations@escribersnetlwwwascribersaet 6 1 2 3 4 5 6 7 8 a 10 11 12 SNOD The IRS examined Mr. Maddox's return. The IRS never received a Form W-2 reporting amounts paid to or withheld from Mr. Maddox by Daehan. (Stip. 5.) The IRS adjusted Mr. Maddox's wages and Federal income tax withholding to remove the Daehan amounts, disallowed the dependency exemption for Mr. Forte, disallowed most of the EIC, and denied head-of-household status (and determined "sinalp" starns instpad). On Fphrnarv 14. 201R. thp TRS issued to Mr. Maddox an SNOD (Ex. 1-J, Stip. 2) that rerlecrea tnese aaJustments ano aeterminea a aericiency or tax. On March 19, 2018, Mr. Maddox timely filed his 13 petition in this Court, pursuant to section 6213(a). At 14 that time he resided in Georgia (Stip. 1.) 15 16 17 1R 19 21 22 I. General evidentiary principles OPINION The IRS's determination is presumed correct, see INDOPCO, Inc. v. Commissioner, 503 U.S. 79, 84 (1992), and the taxpayer generally bears the burden of proof, see Rule II. Wage income and withholding Under section 32(a)(1), the EIC is a percentage 23 of the amount of the taxpayer's earned income, so that the 24 amount of the EIC he will receive depends in part on the 25 amount of his earned income. Consequently, disputes about onners (973) 406-2250| operations@escribersaet j www.esaibersaet EIC sometimes ironically involve the IRS contending that the taxpayer has less income than he reported. That is the 7 case here. Mr. Maddox did not prove that he received from Daehan any wages from which any income tax was withheld. He testified that Daehan failed to pay him, and he could not explain any source for the information reflected on the facsimile of Form W-2 from Daehan associated with his rørnrn as filed. wp thereforp sustain rho TRs's adjustments of wage income and tax withholding. 111. Urealts ano aeauctions Section 151(a) of the Internal Revenue Code allows deductions for certain personal exemptions. Section 151(c) allows an exemption for "each individual who is a dependent (as defined in section 152)". Section 152(a) 1 2 3 4 5 6 7 8 a 10 11 12 13 14 15 16 Provides that "dependent" means either "a qualifying 17 la 19 child" (as defined in section 152(c)) or "a qualifying relative" (as defined in section 152(d)). Similarly, under section 32(b)(1), the amount of ZU LHe L1L Lu wuicu d dxpdyer ittdy ae en 1 leu disu uepenus 21 in part on the number of "qualifying children" he has. On 22 Schedule EIC submitted with his return, Mr. Maddox claimed 23 Mr. Forte as a "qualifying child". Section 32(c)(3) 24 Provides that the term is defined in section 152(c). 25 #973)406-2250{operationseescribersmet|wwwescribersmet A. "Qualifying child" For three reasons, Mr. Forte does not meet the 8 definition of a "qualifying child": 1. Relationship (sec. 152(c)(1) (A), (c)(2)). Mr. Forte did not have the required "relationship" with Mr. Maddox. A "stepbrother" can be a "qualifying child", sec. 152(c)(2) (B), but Mr. Forte was not Mr. Maddox's stepbrother. While calling him a "stonbrothor" mav havo hopn consistont with rollmanial 1 2 3 4 5 6 7 8 o 10 usage in his household, Mr. Maddox did not show that his 11 motner was marrlea to Mr. Forte's ratner or naa a 12 13 14 relationship with Mr. Forte's father that might be considered equivalent to marriage. 2. Abode (sec. 152(c)(1) (B). Mr. Forte 15 did not have "the same principal place of abode as [Mr. 16 Maddox] for more than one-half of" 2016. Rather, Mr. 17 Maddox testified that Mr. Forte lived in the same house 1R with him for only five months of 2016. 19 3. Age (sec. 152(c) (3) (A)). Mr. Forte was ZU 110 youlig e11ouy11 _ __ ___ _ o ue d t1ud11;_y111y U1111u. u111ess 11e wds .. , , , 21 22 "Permanently and totally disabled", sec. 152(c) (3) (A), (B), and Mr. Maddox gave only very general testimony about 23 Mr. Forte's health. He did not make a showing of 24 Permanent and total disability. 25 crir)PR 73) 406-2 250| operations@escribenmet | www.escribenmet B. "Qualifying relative" 9 Although the EIC requires a "qualifying child", a dependency exemption deduction may be claimed for a dependent who is a "qualifying relative", a standard somewhat easier to meet than "qualifying child". That term is defined in section 152(d), and for three reasons, Mr. Forte does not qualify under even the lower threshold of that definition: 1. Relationshin (spos. 15?(d)(1)(M. 1 2 3 4 5 6 7 8 a 10 (d)(2) (H)). As with "qualifying child", a "stepbrother" 11 may oe a "quallrying relative", out Mr. Forte was not Mr. 12 Maddox's actual stepbrother. However, the relationship 13 14 test may be satisfied in the case of "[a]n individual * * * who, for the taxable year of the taxpayer, has the same 15 Principal place of abode as the taxpayer and is a member 16 of the taxpayer's household." See sec. 152(d)(1) (A), 17 (d)(2) (H). But again, Mr. Forte lived in Mr. Maddox's la household for only 5 months in 2016. 19 21 22 23 24 2. Gross income (sec. 152(d)(1) (B)). To be "gross income ... less than the exemption amount", but there is no evidence in the record as to Mr. Forte's income. 3. Support (sec. 152(d) (1) (A), (d)(1)(C)). 25 To claim Mr. Forte as a "qualifying relative", Mr. Maddox . Cnnæ 9733406-2250|operations@escribers.net!www.esaibers.net 10 would have to prove that he had provided "over one-half of UMr. Forte's] support". He did not prove any quantum of support. Mr. Maddox supported Mr. Forte for, at most, 5 months of the year. And even as to those 5 months, Mr. Forte lived in a home that Mr. Maddox did not own, and in which he paid rent for only a single room--and Mr. Forte lived in a different room. Mr. Maddox made no showing of his provision of money for Mr. Forte's food, clothing, or mpdical rarp. Hp did not nrnvp sunnnrr. C. Head-of -household status Ine errective tax rates ror a neaa or nousenola under section 1(b) are lower than the effective tax rates for unmarried individuals under section 1(c). Mr. 1 2 3 4 5 6 7 8 o 10 11 12 13 14 Maddox's entitlement to head-of-household status is 15 16 17 19 defeated by the conclusion that Mr. Forte was not his "qualifying child" in 2016. "Head of household" filing status depends on having a "qualifying child". See sec. 2(b)(1) (A)(i). Because Mr. Forte was not his "cualifyino 19 child", he is not eligible for this benefit. 21 Mr. Forte as a dependent for purposes of the exemption 22 23 deduction, nor to the enhancement of the EIC, nor to head- of-household status, nor to the credit for Federal income 24 tax withholding that he reported from Daehan. 25 Because we sustain all of the IRS's adjustments in the SNOD, we will enter decision in favor of the 11 Commissioner. This concludes the Court's oral Findings of Fact and Opinion in this case. (Whereupon, at 11:18 a.m., the above-entitled matter was concluded.) 1 2 3 4 5 6 7 8 O 10 11 12 13 14 15 16 17 1R 19 ZU 21 22 23 24 25 73)406-2250}operations@escribers.net|www.escribers.net