TAX COURT OPINION

Case: Estelle Frazier
Docket Number: 11333-12S
Judge: Gale
Opinion Type: bench
Filed: 02/26/2013
Pages: 6

UNITED STATES TAX COURT WASHINGTON, DC 20217 DRB ESTELLE FRAZIER, Petitioner, V. COMMISSIONER OF INTERNAL REVENUE, Respondent O R D E R ) ) ) ) ) Docket No. 11333-12S. ) ) ) ) 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 in the above case before Judge Joseph H. Gale for the Westbury trial session at New York, New York, on February 13, 2013, containing his oral findings of fact and opinion. Decision will be entered for respondent with respect to the deficiency and for petitioner with respect to the penalty in accordance with the oral findings of fact and opinion. (Signed) Joseph H. Gale Judge Dated: Washington, D.C. February 26, 2013 SERVED Feb 27 2013 Capital Reporting Company Estelle Frazier 02-13-2013 3 1 Bench opinion by Judge Joseph H. Gale 2 February 13, 2013 3 Estelle Frazier v. Commissioner 4 Docket No. 11333-12S S THE COURT: The Court has decided to render 6 oral findings of fact and opinion in this case and 7 8 the following represents the Court's oral findings of fact and opinion. The oral findings of fact and 9 opinion shall not be relied upon aSprecedent in any 10 other case. 11 This case was heard as a Small Tax Case 12 pursuant to the provisions of section 7463 of the 13 14 Internal Revenue Code in effect when the petition was filed. This bench opinion is made pursuant to the 15 authority granted by section 7459 (b) of the Internal 16 Revenue Code and Rule 152 of the Tax Court Rules of 17 Practice and Procedure. Hereinafter, all section 18 references are to the Internal Reyenue code and all 19 Rule references are to the Tax Court Rules of 20 Practice and Procedure. Pursuant to Rule 27 (a) (3) we 21 refer to minor children by their initials. 22 Petitioner, Estelle Frazier, appeared on 23 her own behalf . Deborah Aloof appeared on behalf of 24 respondent. 25 Re spondent de termined .tJ:H $13, 170 (866) 448 - DEPO www.CapitalReportingCompany.com 2013 Capital Reporting Conhpany Estelle Frazier 02-13-2013 1 deficiency in petitioner's 2010 Federal income tax 4 2 3 4 5 6 7 8 9 and a $2,634 accuracy-related penalty under section 6662. At trial respondent conceded the penalty. The issue for decision is whether petitioner is entitled to a credit for qualified adoption expenses for 2010. Some of the facts have 'been stipulated and are so found. The stipulation of facts and accompanying exhibits are incorporated herein by this reference. 10 Petitioner claimed a $13,170 credit for 11 qualified adoption expenses on her 2010 Federal 12 13 income tax return. She reported no income for 2010 and claimed a refund equal to the amount of the 14 credit. Petitioner claimed the credit for expenses 15 incurred in connection with the adoptions of Gerard 16 Alston and D. D. , both of whom qualified as a "child 17 with special needs" for purposes of the adoption 18 credit. 19 The adoption of Gerard Alston was finalized 20 in 1999 and the adoption of D.D. was finalized in 21 2003. Petitioner has not claimed any adoption credit 22 with respect to the adoption of Gerard Alston or D.D. 23 24 25 on any Federal income tax return other than her 2010 return. In a notice of deficiency dated June 21, (866) 448 - DEPO www.CapitalReportingCompany.com 2013 Capi'tal Reporting Company Estelle Frazier 02-13-2013 5 1 2 3 4 5 6 7 8 2012, respondent disallowed the adoption credit claimed by petitioner on the ground that expenses incurred in 1999 and 2003 for adoptions finalized in those years could not be claimed'as a credit for 2010. The notice of deficiency informed petitioner that the entire amount of her claimed refund was being "withheld pending the outcdme of this examination" and that if the determined deficiency is 9 upheld, "the overpayment will be lapplied to the tax 10 deficiency." 11 12 13 Petitioner timely petitkoned this Court for redetermination. Respondent's determinations in the notice 14 of deficiency are presumed correct, and petitioner 15 must prove those determinations wrong in order to 16 prevail. Rule 142 (a) Welch v. HeJivering, 290 U. S. 17 18 111 (1933) . Since 1997 the Interrial Revenue Code has allowed a credit, subject to limit!ations, in the 19 amount of the "qualified adoption iexpenses" paid or 20 incurred by a taxpayer. See Small¡ Business Job 21 Protection Act of 1996, Pub. L. Noi. 104-188, sec. 22 1807, 110 Stat. 1755. 23 Generally, "qualified adoption expenses" 24 are reasonable and necessary adoption fees, court 25 costs, attorney fees, and other expenses directly (866) 448 - DEPO www.CapitalReportingCornpany.com 2013 Capital Reporting Company Estelle Frazier 02-13-2013 6 1 2 3 4 5 6 7 related to the legal adoption of a child by the taxpayer. At all times relevant to this case, expenses paid or incurred during or after the taxable year in which the adoption became final were allowed as a credit in the year the expenses were paid or incurred. Expenses paid or incurred before the taxable year in which the adoption became final were 8 allowed as a credit for the year following the year 9 the expenses were paid or incurred. A taxpayer whose 10 adoption of a "child with special needs" became final 11 12 in 2003 was treated as having paid qualified adoption expenses equal to $10,000 in that year -- the maximum 13 allowable credit at the time -- regardless of the 14 taxpayer's actual expenses. No similar provision 15 existed for an adoption of a "child with special 16 needs" that became final in 1999. 17 18 For 2010, the adoption credit was allowed under section 36C and was refundable. Prior to 2010 19 the credit was allowed under section 23 and was 20 nonrefundable. For years prior tol 2010, section 21 23 (c) allowed taxpayers to carry forward to the 22 23 succeeding taxable year any portion of the credit they were unable to use in the current year because 24 such amount exceeded their tax liability. 25 However, no credit was allowed to be (866) 448 - DEPO www.CapitalReportingCompany.com 2013 Capital Reporting Company , Estelle Frazier 02-13-2013 1 2 3 4 carried forward "to any taxable year following the fifth taxable year after the taxable year in which the credit arose . " Sec. 23 (c) . The adoptions for which petitioner claimed 5 credit were finalized in 1999 and 2003, respectively. 6 Petitioner was treated as having paid $10,000 of 7 qualified adoption expenses in 20iO3 with respect to 8 9 the adoption of D.D., and she had' offered no evidence that she paid any qualified expenses after 1999 with 10 respect to the adoption of Gerard Alston. Thus, any 11 credit petitioner was entitled to claim with respect 12 to the adoptions at issue arose no later than 2003. 13 Under section 23(c), a credit arising in 2003 cannot 14 be carried forward to any taxable year beyond 2008. 15 Accordingly, we conclude that respondent properly 16 disallowed the adoption credit petitioner claimed for 2010. 17 18 . On the basis of the foregoing, decision 19 will be entered for respondent with respect to the 20 deficiency and for petitioner with respect to the 21 penalty. 22 23 24 25 This concludes the Court s oral findings of fact and opinion in this case. (Whereupon, at 5:55 p.m., the above- entitled matter was concluded. ) (866) 448 - DEPO www.CapitalReportingCompany.com 2013