TAX COURT OPINION

Case: Kevin Dean Chaffee
Docket Number: 5425-11
Judge: Holmes
Opinion Type: bench
Filed: 05/02/2012
Pages: 8

UNITED STATES TAX COURT WASHINGTON, DC 20217 KEVIN DEAN CHAFFEE, Petitioner, v. COMMISSIONER OF INTERNAL REVENUE, Respondent ) ) ) ) ) Docket No. 5425-11. ) ) ) ) ) ) ) ) ) Order of Service of Transcript Pursuant to Rule 152(b), Rules of Practice of Procedure of this Court, there is transmitted herewith to petitioner and to respondent a copy of the pages of the transcript of the trial of the above case before Judge Mark V. Holmes, at Phoenix, Arizona, on March 29, 2012 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, a decision will be entered under Rule 155. (Signed) Mark V. Holmes Judge Dated: Washington, D.C. May 2, 2012 SERVED BY " 3 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 Judge Mark V. Holmes March 29, 2012 Kevin Dean Chaffee v. Commissioner 5425-11 THE COURT: In the case of Kevin Dean Chaffee v. Commissioner, No. 5425-11, the Court has decided to render oral findings of fact and opinion, and the following is the Court's oral findings of fact and opinion. 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's Rules of Practice and Procedure. The parties reached a stipulation in this case, which, together with the testimony, constitute the record. Mr. Chaffee was a resident of Arizona when he filed his petition. The case involves his 2008 tax year and began when the Respondent sent him a notice of deficiency raising four issues. One was the deductibility of his student loan interest, the second was his filing status, the third was the tax benefits of a minor child whom Mr. Chaffee claimed as a dependent, and the fourth was the imposition of a late filing penalty. I'll treat them in order. On one, the government has conceded that the student loan interest deduction is something that Mr. Chaffee is entitled 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 to. The filing status is a little bit more complicated. Mr. Chaffee claimed head of household filing status on his tax return. ·Initially, the Commissioner said that he should have filed as a married, filing separate person, but with proof that he was divorced in 2008, the government now asserts that he should have the filing status of single. Mr.. Chaffee presented no evidence at trial that he had a qualifying person in his household sharing it for more than half of the year, and so he's not entitled to head of household status. The government's position in its pretrial memo, in other words, that his filing status was single in 2008, is the correct one. The third and by far the most complicated issue is whether a minor child, whose initials are GC, Mr. Chaffee's daughter with his ex-wife, qualifies as a dependent, thereby entitling him to the various tax benefits that come from having a dependent child in tax year 2008. Petitioner and his ex-wife had one child, as I said, GC, whom Mr. Chaffee claimed as a dependent on his 2008 income tax. He and his ex were awarded joint custody of their daughter, and as part of their child care plan under Arizona law, his ex-wife was 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 designated as the residential, physical custodial parent of GC. That means that physical custody of GC throughout the year 2008 was primarily with her mother and not Mr. Chaffee. And indeed, Mr. Chaffee did not attach to his 2008 income tax return a Form 8332 or any other written declaration signed by his ex-wife releasing the exemption for GC. Taxpayers who.get the Form 8332 from their ex spouse and attach it to their return are extremely unlikely to face hassles from the IRS, but Mr. Chaffee did not and therefore does. Now the key language in the Internal Revenue Code is at Section 151(c), which allows a taxpayer an exemption for a dependent, as defined in Internal Revenue Code Section 152. Section 152(a) then defines a dependent to include an individual who is a qualifying child. Now it's clear of course that GC is a qualifying child because Section 152(c) says that an individual who is a son or daughter of a taxpayer is a qualifying child, but there are other requirements and the most important one is that that child has to share the principal place of abode with the taxpayer for more than half the year. Now this is as a general rule. There are 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 exceptions. As we noted, Mr. Chaffee did not share a principal place of abode with his daughter during the year 2008 because his ex had primary custody. However, there are exceptions to this, and the major exception is in Section 152(e) of the Internal Revenue Code, which has special rules on which of two parents gets to claim a child as a dependent ·in case they are divorced. The one that's relevant here is 152(e) (2) in which the general rule that the custodial parent gets the benefits of having a. dependent child can be transferred to the noncustodial parent "if the custodial parent signs a written declaration in such manner and form as the secretary may by regulations prescribe that such custodial parent will not claim such child as a dependent for any taxable year beginning in such calendar year and the noncustodial parent attaches such written declaration to the noncustodial parent's return for the taxable year." Although Mr. Chaffee and his ex shared joint custody of GC during the year 2008, as I said, the physical custody of GC was primarily with her mother. Mr. Chaffee did not attach either a Form 8332 or other documentation sufficiently evidencing that his ex had . 25 released the exemption for GC to him for the tax year 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 2008. I do find that he did attach something to his tax return, which was stipulated into evidence. It was an incomplete form that apparently the State of Arizona uses in custody cases, paragraph 10 of which said "Respondent", in this context that means Mr. Chaf fee, not the Commissioner, "Respondent shall be allowed to claim the parties' minor child for state and federal income tax purposes every year commencing in 2008 and all even numbered years thereafter. Petitioner", and in this context that means his former spouse, "shall be allowed to claim the minor child commencing in 2009 and all odd numbered years thereaf ter . " The question then becomes whether this attachment, this partial attachment, qualifies as a signed declaration by his ex-wife, and I have to find that it does not suffice under Section 152(e) for two reasons. The first is that his ex-wife did not sign it, and that alone is sufficient under Miller v. Commissioner, 114 T . C. 184, 191-94 (2000 ) , af f ' d, 293 F.3d 1208 (10th Cir. 2002); see also Himes v. Commissioner, T.C. Memo 2010--97. The second reason that this is inadequate is that, in fact, what was attached to Mr. Chaffee's tax 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 return was incomplete. He left out the last page of the form from the Arizona State Court system which included the immediately following sentence, "Each year, the obligor", that again in this context is Mr. Chaffee, "may claim these exemptions only if the obligor has paid all child support and arrears ordered for the year by December 31 of that year." Now such a conditional clause is itself controversial, but I don't have to get into that in this opinion because it turns out that even Mr. Chaffee admitted that he was at least two weeks in arrears on his child support in 2008, which by the terms of this Superior Court order then means that he was not entitled to claim GC as his dependent on his federal tax returns. So, for those two reasons, I have to conclude that the Respondent is right, Respondent in this context the Commissioner, is right that Mr. Chaffee may not claim GC as a dependent for his 2008 tax year. That leaves only the question of the penalty for late filing. That penalty, pursuant to Internal Revenue Code Section 6651(a) (1), is imposed if a return is not timely filed and amounts to 5 percent of the amount required to be shown as tax on the return for each month of delay, up to a maximum of 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 25 percent. The parties stipulated that Mr. Chaffee did not in fact timely file his tax return for the year 2008 . He certainly provided no explanation that would constitute reasonable cause during his testimony at trial. However, there is a bit of an ambiguity even on this point, and that is because the parties stipulated that Mr. Chaffee's tax return, though due on April 15, 2009, was received by the IRS on June 15, 2009., which would, under law, be the date it was considered filed. On the notice of deficiency, the explanation of the delinquency penalty states that the return was filed only in October 4, 2010. So although I find in favor of the Commissioner on the imposition of the penalty, its calculation may require:some rejiggering. The Court will therefore have tofpfter the transcript comes ing\issue an order for computations under Rule 155 of our Tax Court Rules . This concludes the Court's oral findings of fact and opinion in this case . (Whereupon, at 9:17 a.m., the bench opinion in the above-entitled matter was concluded.) // // Heritage Reporting Corporation (202) 628-4888