TAX COURT OPINION

Case: Luke Osei-Kwame
Docket Number: 20690-09S
Judge: Colvin
Opinion Type: bench
Filed: 04/30/2010
Pages: 10

UNITED STATES TAX COURT WASHINGTON , DC 2021 7 LUKE OSEI-KWAME Petitioners , v . Docket No . 20690-09 S COMMISSIONER OF INTERNAL REVENU E Respondent O R D E R Pursuant to Rule 152(b), Tax Court Rules of Practice and Procedure, it i s ORDERED that the Clerk of the Court shall transmit herewith to petitioner and to respondent a copy of the pages of the transcript of the trial in the above case . before Judge David Gustafson at Washington, D .C ., on April 12, 2010, containing his oral findings of fact and opinion rendered at the conclusion of the trial . In accordance with the oral findings of fact and opinion, decision will be entered under Rule 155 . (Signed ) David Gustafson Judge Dated : Washington, D .C . April 30, 2010 s . 1) APR 8 0 2010 3 1 Bench Opinion by Judge David Gustafson April 16, 2010 2 Osei-Kwame v . Commissioner Docket No . 20690-09S 3 THE COURT : The Court has decided to render 4 oral Findings of Fact and opinion in this case, an d 5 the following represents the Court's oral Findings of 6 Fact and Opinion . The oral Findings of Fact an d 7 Opinion shall not be relied on as precedent in any other case . 9 This Bench Opinion is made pursuant to th e 10 authority granted by section 7459(b) of the Internal 11 Revenue Code of 1986, as amended, and Rule 152 of the 12 Tax Court Rules of Practice and Procedure . 13 By a statutory notice of deficiency dated 14 June 1, 2009 [Ex . 1-J], the IRS determined a 15 deficiency in the Federal income tax of petitioner 16 Luke Osei-Kwame for the year 2008, in the amount of 17 $3,288 . The issues in . dispute are Mr . Osei-Kwame's 18 entitlement to : (1) a dependency exemption for hi s 19 daughter ; (2) a child tax credit for her ; (3) head-of- 20 household status on his tax return ; and (4) an earned 21 income tax credit, a small portion of which the IR S 22 now concedes . For the reasons explained hereafter, we 23 will sustain the deficiency assessed against Mr . Osei- 24 Kwame, except to the extent of the IRS's smal l 25 concession . Heritage Reporting Corporation (202) 628-4888 4 1 Trial of this case was scheduled fo r 2 April 16, 2010, in Washington, D .C ., but Mr . Osei- 3 Kwame did not appear . However, the parties ' 4 Stipulation of Facts, with Exhibits 1-J through 6-R, 5 provides a sufficient basis for deciding this case . 6 We find the following facts : 7 Findings of Fac t 8 At the time he filed his . petition, Mr . Osei- 9 Kwame resided in Maryland . [Stip . 1 . 1 10 Mr . Osei - Kwame was formerly married to Grace 11 Osei-Kwame . They have a daughter, whom we will refer 12 . to by her initials, E .O ., to protect her privacy . Mr . 13 and Mrs . Osei-Kwame are divorced . The custody of E .O . 14 has been much in dispute . In 2003 Mr . Osei - Kwame was 15 awarded physical custody, and Grace was grante d 16 visitation rights . [Ex . 3-P .] In 2004 Grace was 17 awarded physical custody and Mr . Osei-Kwame wa s 18 granted visitation rights . [Ex . 5-P .] In 2005 Mr . 19 Osei - Kwame was denied visitation rights and wa s 20 granted only telephone contact with E .O . [Ex . 7-P .] 21 That 2005 order was still in effect in 2008 [Stip . 22 15 1 , the year in issue ; and E .O . did not reside with 23 Mr . Osei - Kwame at any time in 2008 [ Stip . 22] . Mr . 24 Osei-Kwame is obligated by court order to provid e 25 various forms of financial support to his ex-wife and Heritage Reporting Corporatio n (202) 628-4888 5 1 daughter, and we assume that he provided the majority 2 of the financial support for E .O . in 2008 . 3 Mr . Osei-Kwame timely filed his 2008 Federal 4 income tax return . [Stip . 3 .1 On that return, he 5 claimed E .O . as a dependent, claimed a child ta x 6 credit for her, claimed head-of-household status, and .7 claimed a refundable earned income tax credit o f 8 $2,917, calculated on the basis of E .O . as hi s 9 dependent . [Stip . 4 .1 There is no suggestion in the 10 record that he attached to his 2008 tax return an y 11 Form 8332, "Release of Claim to Exemption for Child of 12 Divorced or Separated Parents" or any equivalent 13 statement signed by Grace . 14 The IRS disallowed Mr . Osei-Kwame's claim of 15 head-of-household status, dependency exemption fo r 16 E .O ., child tax credit, and earned income tax credit . 17 It determined a tax deficiency of $3,288 . [Stip . 5 .1 18 Mr . Osei-Kwame filed a timely petition in this Court 19 challenging all those disallowances . Respondent now 20 concedes that Mr . Osei-Kwame is entitled to a small 21 portion of the earned income tax credit, but not in 22 the larger amount ($2,917) that he claimed on th e 23 basis of E .O .'s being treated as his dependent . 24 Paragraph 23 of the Stipulation indicates 25 that Mr . Osei-Kwame's intention at the trial was "to Heritage Reporting Corporatio n (202) 628-4888 6 1 explain to the Court the reasons why his daughter did 2 not reside with him during the year 2008 ." In hi s 3 exhibits, Mr . Osei-Kwame contends that the award o f 4 E .O .'s custody to Grace was most unfair, that being in 5 Grace's custody was not in E .O .'s best interest and 6 put her in danger, that the court process that decided 7 E .O .'s custody was unjust, that Grace has illegall y 8 deprived him of contact with E .O ., and that the state 9 child support enforcement administration treated him 10 very badly . [See Exs . 4-P, 8-P, 9-P, 11-J, 12-P .] We 11 did not hear testimony of Grace, E .O ., or anyone else 12 connected to the situation ; but we can assume fo r 13 purposes of our tax deficiency decision that Mr . Osei- 14 Kwame's view of these custody matters, as reflected in 15 his exhibits, is correct . This suit, on the othe r 16 hand, is about tax matters, and unfortunately for Mr . 17 Osei-Kwame's contentions here, the pertinent facts are 18 very simple : First, E ..O .'did not live with Mr . Osei- 19 Kwame in 2008 . And second, Mr . Osei-Kwame, the non- 20 custodial parent, did not, so far as the record shows, 21 attach to his 2008 return any Form 8332 or other 22 release signed by Grace, E .O .'s custodial parent. 23 Opinion 24 The IRS's determination is presumed correct, 25 and generally the taxpayer bears the burden to prov e Heritage Reporting Corporation (202) 628-4888 7 1 his entitlement to the exemptions and credits h e 2 claimed . Rule 142(a) ; Welch v . Helvering, 290 U .S . 3 111, 115 (1933) . Mr . Osei- Kwame has not contended 4 that the burden of proof has shifted under sectio n 5 7491(a), and the record does not suggest any basis for 6 such a contention . 7 All four of the tax benefits at issue here 8 depend on the taxpayer's having a "qualifying child", 9 the definition of which includes the child's livin g 10 with the taxpayer who claims the benefit . As for the 11 dependency exemption , section 151(a) of the Internal 12 Revenue Code provides for a deduction for certai n 13 exemption amounts . Section 151(c) allows an exemption 14 for "each individual who is a dependent (as defined in 15 section 152)" . The general definition requires that, 16 in order to be a "dependent" of the taxpayer a child 17 must have "the same principal place of abode as the 18 taxpayer for more than one-half of" the tax year . 19 Sec . 152(c) (1) (B) . 20 As for the child tax credit , . section 2 4 21 provides for a tax credit for "each qualifying child 22 of the taxpayer" ; and the statute looks to that same 23 definition . That is, section 24(c)(1) provides that 24 "[t]he term 'qualifying child' means a qualifyin g 25 child of the taxpayer (as defined in section 152(c))" . Heritage Reporting Corporatio n (202) 628-4888 8 1 Thus, the child tax credit, like the dependenc y 2 exemption, depends on a child's sharing the " principal 3 place of abode " of the taxpayer . 4 As for head-of-household status , section 1 5 of the Code provides the various rates at which income 6 tax is imposed, with more favorable rates for heads of 7 households in section 1(b) . The Code also provides a 8 larger standard deduction for heads of households in 9 section 63 (c) (2) (b) . Section 2 (b) defines head o f 10 household ; and as that definition is relevant here, it 11 includes the requirement that the taxpayer "maintains 12 as his home a household which constitutes for mor e 13 than one half of such taxable year the principal place 14 15 of abode , as a member of such household, of * * * a qualifying child of the individual (as defined in 16 section 152(c) * * *)" . 17 As for the earned income tax credit , section 18 32(a)(1) allows an eligible individual an earne d 19 income tax credit against that individual's income tax 20 liability . The amount of the credit is determine d 21 according to percentages and limitations that vary, 22 depending on whether the taxpayer has a "qualifying 23 child" . Sec . 32(b) . Under section 32(c)(3)(A), a 24 qualifying child is defined the same as a qualifying 25 child in section 152(c), under which the child mus t Heritage Reporting Corporation (202) 628-4888 9 1 have "the same principal place of abode as the 2 taxpayer for more than one-half of" the tax year . 3 Mr . Osei-Kwame's daughter was in th e 4 physical custody of her mother and did not share Mr . 5 Osei-Kwame's abode . Thus, under these provisions, Mr . 6 Osei-Kwame is not eligible for the dependenc y 7 exemptions or the other tax benefits that follo w 8 the child tax credit, head-of-household status, or the 9 increased earned income credit . 10 Two of these four provisions have a n 11 exception that applies to some non-custodial parents, 12 but Mr . Osei-Kwame does not qualify for thi s 13 exception . Section 152(e) includes a "Special Rule 14 for Divorced Parents, Etc ." That rule could apply to 15 Mr . Osei-Kwame if "the custodial parent [i .e ., Grace] 16 signs a written declaration * * * that such custodial 17 parent will not claim such child as a dependent for 18 any taxable year beginning in such taxable year", sec . 19 152(e)(2)(A), and if "the noncustodial parent [i .e ., 20 Mr . Osei-Kwame] attaches such written declaration to 21 the noncustodial parent's tax return", sec . 22 152(e)(2)(B) . The IRS has prescribed Form 8332 as the 23 form for the written declaration . If a non-custodial 24 parent successfully invokes this exception, then h e 25 can obtain the dependency exemption for the child and Heritage Reporting Corporatio n (202) 628-4888 10 1 the child tax credit . (This exception does not enabl e 2 him to obtain head-of-household status or th e 3 increased earned income tax credit, because th e 4 statutes for those benefits state that the exceptio n 5 does not apply . See section 2(b)(1)(A)(i) and section 6 32(c)(3)(A), both of which include the phras e 7 "determined without regard to section 152(e)" . ) 8 Mr . Osei-Kwame does not qualify for th e 9 exception because, as far as the record shows, he did 10 not attach to his return a declaration from Grac e 11 stating that she would not claim E .O . as her 12 dependent . 13 This may feel like an unfair outcome to the 14 noncustodial parent who provides most or all of the 15 financial support for a child but cannot obtain the 16 cooperation of the custodial parent . However, i n 17 section 152 Congress has created several objective 18 tests that draw bright lines . The alternative would 19 be rules that are sensitive to the wide variety of 20 family circumstances, but such sensitive rules would 21 be difficult for the IRS and the courts to administer, 22 and such sensitive rules would effectively requir e 23 Government intrusion into delicate family matters and 24 intractable human problems . This may be why Congress 25 stopped where it did in making exceptions to the Heritage Reporting Corporation (202) 628-4888 1 1 1 "place of abode" requirement of section 152(c)(1)(B) . 2 In any event, Mr . Osei-Kwame is not eligible for the 3 four tax benefits at issue here . 4 The Court is bound to apply the law as 5 Congress enacted it . We do not have the power to 6 address sympathetic circumstances by crafting ad hoc 7 remedies . The Court cannot award the dependenc y 8 exemption to redress an injustice in a child custody 9 arrangement, and a tax benefit would be a poor and 10 utterly inadequate remedy for that problem . 11 Consequently, the deficiency as determined 12 by respondent will be sustained, except to the extent 13 of respondent's concession . To enable the parties to 14 compute the effect of that concession, decision will 15 be entered under Rule 155 . 16 This concludes the Court's oral Findings of 17 Fact and Opinion in this case . 18 (Whereupon, at 2 :33 p .m ., the bench opinion 19 in the above-entitled matter was concluded . ) 20 21 22 23 2 4 25 Heritage Reporting Corporation (202) 628-4888