TAX COURT OPINION

Case: Noor Farah Egal
Docket Number: 5086-13S
Judge: Marvel
Opinion Type: bench
Filed: 04/28/2014
Pages: 10

CMS UNITED STATES TAX COURT WASHINGTON, DC 20217 NOOR FARAH EGAL, Petitioner(s), v. ) ) ) ) ) Docket No. 5086-13S COMMISSIONER OF INTERNAL REVENUE, Respondent. ) ) ) ORD ER Pursuant to Rule 152(b), Tax Court Rules of Practice and Procedure, it is ORDERD that the Clerk of the Court shall transmit to petitioner and to respondent a copy of the pages of the transcript of the proceedings in the above case before Judge L. Paige Marvel at St. Paul, Minnesota, on April 18, 2014, containing the Court's oral findings of fact and opinion rendered at the trial session at which the case was heard. In accordance with the Court's oral findings of fact and opinion, decision will be entered for respondent. (Signed) L. Paige Marvel Judge Dated: Washington, D.C. April 28, 2014 SERVED Apr 28 2014 Capital Reporting Company 3 1 Bench Opinion by Judge L. Paige Marvel i 2 April 18, 2014 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Noor Farah Egal v. Commissioner 1 Docket No. 5086-13S THE COURT HAS DECIDED TO RENDER ORAL FINDINGS OF FACT AND OPÍNION IN THIS CASE AND THE FOLLOWING REPRESENTS THE COURT'S ORAL FINDINGS OF. FACT AND OPINION. THE ORAL FINDINGS OF FACT AND OPINION SHALL NOT BE RELIED UPON AS PRECEDENT IN ANY OTHER CASE. This case was heard pursuant to the provisions of section 7463 of the Internal Revenue Code of 1986 as amerded, and Rules 170 through 174 of the Tax Court Rules of Practice and Procedure. Pursuant to section 7463(b), the decision to be entered is not reviewable by any other court, and this opinion shall ot be treated as precedent for any other case. 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. Unless otherwise indicated, subsequent section references are to the Internal Revenue Code of 1986 as amended and in effect for the year in issue, and Rule 1 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 4 references are to the Tax Court Rules of Practice and Procedure. Kathryn J. Sedo and Bin Dai (student) appeared on behalf of petitioner. Christina L. Cook appeared on behalf of respondent. Respondent determined a deficiency of $7,700 in petitioner's Federal income tax for 2011. The issues for decision are: (1) whether petitioner is entitled to claim dependency exemptions for his adult niece, Hamdi Ahmed Farah (Ms. Farah), and Ms. Farah's two childred, H.A. son and H.A. daughter (collectively, Ms. Farah's children); (2) whether petitioner is entitled to claim head of household filing status'for 2011; (3) whether petitioner is entitled to claim Ms. Farah's children for the earned income credit (EIC) for 2011; and (4) whether petitioner is entitled to claim Ms. Farah's children for the child tax credit for 2011. We conclude that petitioner is not so entitled. FINDINGS OF FACT Petitioner timely filed a Form 1040, U.S. Individual Income Tax Return, for 2011. On his return petitioner claimed head of household status, dependency exemptioñ deductions for Ms. Farah and Ms. Farah's children, the child tax credit for Ms. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 5 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 Farah's children, and the EIC. Ms. Farah is the daughter of petitioner's brother, Ahmed Farah Egal. Ms. Farah :and her children immigrated to the United States sometime during 2011, but the record does not contain sufficient credible evidence for the Court to make a finding regarding the date when they arrived in the United States or when they began to reside with and be supported by petitioner. Dependency Exemptions DISCUSSION Section 151(c) permits a taxpayer to deduct an exemption for each dependent as that term is defined under section 152. Section 152 provides that a dependent must be either a qualifying child or a qualifying relative. Section 152(d) defines a qualifying relative as an individual who bears a specified relationship to the taxpayer, who earned gross income less than the exemption amount defined in section 151(d), who had more than one-half of his or her support provided for by the taxpayer during the tax year, and who is not the qualifying child of any other taxpayer. An individual satisfies the specified relationship requirement if the individual is a son or daughter of a brother or sister of the 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 6 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 taxpayer. Sec. 152(d)(2)(E). Section 152(c)(1) defines a qualifying child as a child who bears a specified relationship to the taxpayer, who lived with the taxpayer for more than one-half of the tax year at issue, and who did not provide more than one-half of his or her own support during the tax year. For purposes of section 152(c) (1) (A), a child satisfies the relationship requirement if the child is a child of the taxpayer or a descendant of such child, or a brother, sister, stepbrother, or stepsister of the taxpayer or a descendant of any such relative. Sec. 152(c(2). A qualifying child must be less than 19 years old, a student who is less than 24 years old, or permanently and totally disabled. Sec. 152(c)(3). In short, the taxpayer must show that the child satisfies both the age and relationship requirements, the residency requirement, and the support requirement of section 152(c)(1) and (3) for the child to be the taxpayer's qualifying child for a particular tax year. Head of Household Filing Status In order to qualify for head of household filing status under section 2(b), a taxpayer must satisfy the following requirements: (1) The taxpayer 25 must not be married t the close of the taxable year 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 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 or be a surviving spouse for that year; (2) the taxpayer must maintain as his home a household that constitutes the principal place of abode of a qualifying child with the meaning of section (c) or of any other person who is a dependent of the taxpayer under section 151; and (3) the taxpayer must furnish more than half of the cost of maintaining the household during the relevant taxable year. The cost of maintaining the household includes expenses incurred for the mutual benefit of the persons living in the household such as rent or mortgage payments, property taxes, property insurance, utility charges, upkeep and repairs,| and food consumed on the premises. Sec. 1.2-2(d), Income Tax Regs. Earned Income Credit (EIC) Section 32 permits taxpayers with low earned income who qualify as an "eligible individual" to claim a tax credit. An eligible individual is (a) a person who has a "qualifying child", or (b) a person between the ages of 25 and 65 who resided in the United States for more than half of the taxable year and who was not a dependent for whom a dependency exemption deduction is allowed to another taxpayer. Sec. 32(c) (1)(A). The term "qualifying child" has the same meaning for purposes of both 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 1 section 152(c) and section 32. . I Sec. 32(c)(3). 8 2 Child Tax Credit 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Section 24(a) allows a taxpayer a credit up to $1,000 against his or her Federal income tax liability each qualifying child. The term "qualifying child" means a qualifying child of the taxpayer, as defined in section 152(c), who is under the age of 17. Sec. 24(c)(1). Burden of Proof Petitionér had the burden of proving all facts necessary for the Court to conclude that he was entitled to claim his niece, Ms. Farah, and her two children as dependents for 2011 and that he was eligible to claim head of household filing status, the EIC, and the additional child credit, see Rule 142(a)(1), all of which depend upon a finding that petitioner supported at least one qualifying child during 2011. Petit'ioner attempted to carry his burden by offering testimony from his brother and from himself that Ms. Farah and her two children arrived in the United States at the end of April 2011 and lived with him in a residence he rented beginning May 1, 2011. The testimony further indicated that petitioner provided the sole support for Ms. Farah and her two children from the time they arrived in 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 1 the United States until at least the end of 2011. 2 Petitioner did not introduce any credible 3 4 5 6 7 8 documentation to support this testimony even though documentation should have been available and apparently was available at the end of 2011 when Ms. Farah applied for a social security number. The record does not contain any canceled checks, invoices, receipts or other documents to establish 9 petitioner's support of Ms. Farah and her two 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 children nor does it contain any immigration documentation to establish the date when Ms. Farah and her two children arrived in the United States. Petitioner's tax return for 2011 does not help to establish the credibility of his position as it shows that he generated only $19,218 of net profit from his Schedule C business although he testified that he had $2, 000 of monthly income during 2011. The return further shows that petitioner reported that he had no taxable income after claiming the standard deduction and the exemption deductions for himself, Ms. Farah, and her two children. Because he reported that he had no taxable income and that he was entitled to the EIC and the additional child tax credit, petitioner claimed a refund of $4,502 for 2011. 866.488.DEPO www.CapitalReportingCompany.com Capit 1 Reporting Company 10 1 2 3 4 5 6 7 8 9 The other limited documentation in the record does not bolster the credibility of the testimony offered by petitioner. The lease to which the parties stipulated appears to show different handwriting and is not convincing concerning the identity of persons living at petitioner's residence. The signed statement from the lessor, Mohd Wadi, verifies that petitioner resided at his property and that he paid the rent in cash but does not state 10 whether people in addition to petitioner were living 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 at the residence from May 1, 2011, the beginning of the leasehold, as claimed by petitioner. If the lease when signed included the names of all those expected to reside at the property, we would have expected the landlord to verify that fact. He did not. In short, petitioner did not demonstrate to the Court's satisfaction that the testimony introduced at trial, unsupported by any credible documentation, was worthy of belief. Consequently, we conclude that petitioner has not proven by a preponderance of cre ible evidence that he was entitled to the dependency exemption deductions, EIC, additional child tax credit, or head of household filing status that he claimed on his 2011 return. We 866.488.DEPO www.CapitalReportingCompany.com 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 Capital Reporting Company 1 11 sustain respondent's determination of the deficiency for 2011. To reflect the foregoing, decision will be entered for respondent. THIS CONCLUDES THE COURT'S ORAL FINDINGS OF FACT AND OPINION IN THIS CASE. (Whereupon, at 10:05 a.m., the above- entitled matter was concluded.) . 866.488.DEPO www.CapitalReportingCompany.com