TAX COURT OPINION

Case: Janet E. Reffle
Docket Number: 3562-17
Judge: Nega
Opinion Type: bench
Filed: 03/20/2018
Pages: 9

RMM UNITED STATES TAX COURT WASHINGTON, DC 20217 JANET E. REFFLE, Petitioner, v. ) ) ) ) Docket No. 3562-17. 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 to petitioner and to respondent a copy of the pages of the transcript of the proceedings in the above case before Judge Joseph W. Nega at San Francisco, California, on February 14, 2018, 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 under Rule 155. (Signed) Joseph W. Nega Judge Dated: Washington, D.C. March 20, 2018 SERVED Mar 20 2018 3 1 2 3 4 5 6 7 8 9 Bench Opinion by Judge Joseph W. Nega February 14, 2018 Janet E. Reffle v. Commissioner of Internal Revenue Docket No. 3562-17 IbseFCourt 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. This bench opinion is made pursuant to section 7459(b) and Rule 152, and shall not be relied on as precedent in any 10 other case. Unless otherwise indicated, all section 11 references are to the Internal Revenue Code (Code) in 12 effect for the year at issue, and all Rule references are 13 14 to the Tax Court Rules of Practice and Procedure. By a notice of deficiency (notice) dated 15 December 27, 2016, respondent determined a deficiency in 16 petitioner's Federal income taxes for tax year 2015 (year 17 at issue). The issues for decision are whether petitioner 18 19 20 21 is entitled to: (1) a dependency exemption; (2) elect head of household filing status; and (3) claim the earned income tax credit (EITC) for the year at issue. This case was tried on February 12, 2018, in San 22 Francisco, California. Janet E. Reffle appeared pro se. 23 David M. Carl appeared on behalf of respondent. 24 25 FINDINGS OF FACT Some of the facts are stipulated and are so cribers $73)406-2250|operationscescribersmet|www.escnbers.net 1 2 3 found. The stipulation of facts and the attached exhibits are incorporated herein by this reference. At all relevant times, petitioner was a resident of the State of 4 California. At some point during the year at issue, 5 6 7 8 9 petitioner shared a home with Dinah Finley (Ms. Finley). Ms. Finley is over 50 years old. Petitioner and Ms. Finley have no biological or legal relationship. Ms. Finley's biological parents were Karl and Jane Finley. Karl and Jane separated nearly 30 years ago. 10 Thereafter, Karl began seeing petitioner's mother, 11 Barbara. Karl and Barbara did not marry, but lived 12 together for several years before finally separating. It 13 was during that time that petitioner and Ms. Finley began 14 15 16 their relationship. During the year at issue, petitioner worked as an in-home care provider for the elderly and disabled. 17 During that same period, Ms. Finley was unemployed and 18 19 reliant on government benefits. Petitioner timely filed a Federal income tax 20 return (return) for the year at issue. On that return, 21 petitioner elected head of household filing status, and 22 claimed an EITC, along with a dependency exemption for Ms. 23 Finley. On her return, petitioner reported that Ms. 24 Finley was her sister for purposes of the dependency 25 exemption, but, at the same time, claimed Ms. Finley as } BM (973}406-2250|operationsgescribers.net|www.esaibers.net 5 her qualifying child for purposes of the EITC on the Schedule EIC, Earned Income Credit attached to her return. We do not find either of these characterizations to be accurate as, in subsequent dealings with respondent, and in her petition with this Court, petitioner routinely referred to Ms. Finley as her girlfriend. Petitioner's inconsistent position, in this respect, strained her credibility. In the notice, respondent determined that 1 2 3 4 5 6 7 8 9 10 petitioner was only eligible to elect to file her return 11 12 13 14 15 16 17 using the "single" status. As a result of that revision to her filing status, respondent adjusted downward the amount of petitioner's standard deduction. Additionally, respondent determined that petitioner could not claim a dependency exemption for Ms. Finley, and likewise could not claim the EITC on the basis of a qualifying child. Petitioner and Ms. Finley testified at trial, 18 but did not call any other witnesses or produce adequate 19 documentation that may have corroborated their testimony. 20 21 22 23 24 I. Burden of Proof OPINION Generally, the Commissioner's determinations set forth in a notice of deficiency are presumed correct, and the taxpayer bears the burden of persuading the Court that 25 respondent's determination is incorrect. Rule 142(a)(1); cribers (973)406-2250|operationseescriberssietlwwwesenbers.net 6 1 2 3 4 5 6 7 8 see Welch v. Helvering, 290 U.S. 111, 115 (1933). Deductions and credits are a matter of legislative grace, and the taxpayer bears the burden of proving entitlement to any deduction or credit claimed. Rule 142(a); Deputy v. du Pont, 308 U.S. 488, 493 (1940); New Colonial Ice Co. v. Helvering, 292 U.S. 435, 440 (1934). A taxpayer must satisfy the specific requirements for any deduction or credit claimed, and is required to 9 maintain records sufficient to substantiate those claims, 10 and calculate taxable income. INDOPCO, Inc. v. 11 Commissioner, 503 U..S. 79, 84 (1992); see also sec. 6001; 12 13 14 15 16 17 18 sec. 1.6001-1(a), (e), Income Tax Regs. II. Dependency Exemption Section 151(c) permits a taxpayer to claim an exemption for each dependent. Section 152(a) provides that a dependent must be either a "qualifying child" or a "qualifying relative" of the taxpayer. Because petitioner conceded at trial that Ms. Finley was not her qualifying 19 child, we focus on whether Ms. Finley was petitioner's 20 qualifying relative. 21 As defined by the Code and pertinent here, a 22 qualifying relative is an individual who: (1) bears a 23 qualifying familial relationship to the taxpayer; (2) 24 earned gross income less than the exemption amount; and 25 (3) had more than one-half of his or her support (e.g., 973) 406-2250| operations@escribers ne t | www.escribersa et 1 2 3 4 5 6 7 8 9 shelter, food, medical care, etc.) provided by the taxpayer, during the taxable year. Sec. 151(d)(1); sec. 1.152-l(a)(2)(i), Income Tax Regs. An unrelated individual, who shares the same principal place of abode as the taxpayer and is a member of the taxpayer's household for the taxable year, may still be considered to have a "qualifying" relationship with the taxpayer despite not bearing a familial relationship to that taxpayer. Sec. 152(d)(2)(H). 10 To qualify for a dependency exemption, 11 petitioner was required to show, by way of competent 12 evidence, that she provided for more than one-half of Ms. 13 Finley's support during the taxable year at issue. See 14 Blanco v. Commissioner, 56 T.C. 512, 514-515 (1971). At 15 16 trial, petitioner relied exclusively on her own testimony, as corroborated by the testimony of Ms. Finley, to 17 establish that petitioner supported Ms. Finley during the 18 year at issue. To this end, we do not find their 19 testimony credible. Moreover, the record lacks any 20 21 22 further evidence that might indicate petitioner incurred and paid any particular expense related to her purported support of Ms. Finley. Similarly, the record does not 23 conclusively establish how much Ms. Finley or petitioner 24 contributed to the maintenance of their household. To the 25 extent petitioner attempted to introduce documentary (973)406-2250loperations@escribersmet|ww escribersaet 8 1 2 3 4 5 6 7 8 9 evidence into the record to support her position, the record lacks sufficient credible evidence to establish the household's expenses (e.g., utilities, rent). In particular, respondent's cross-examination rendered less- than-persuasive petitioner's claim to have paid a monthly rent of $400 during the year at issue. Additionally, we observe that the record contains no documentary evidence that Ms. Finley actually cohabitated with the petitioner for the entire year at issue. 10 Thus, on the record before us, we find that 11 petitioner has failed to carry her burden of proving that 12 she provided more than half of the support for Ms. Finley 13 during the year at issue. Accordingly, we cannot consider 14 Ms. Finley petitioner's dependent, and we sustain 15 16 17 18 respondent's determination on this issue. III. Head of Household Filing Status Under section 2(b), a taxpayer qualifies for head of household filing status if the taxpayer: (1) is 19 unmarried; (2) is not a surviving spouse; and (3) 20 maintains as his or her home a household that constitutes 21 the principal place of abode for, as relevant here, a 22 qualifying relative as defined in section 152. Sec. 23 2(b)(1). A taxpayer, however, will not satisfy this third 24 requirement if the taxpayer's otherwise-qualifying 25 relative is only considered such by reason of section cribers 973)406-2250|operations@escribersalet|www scnbers.net 9 1 2 3 4 152(d) (2) (H). Sec. 2(b) (3). Petitioner argues that she is entitled to head of household filing status. Petitioner is unmarried, and is not a surviving spouse. Petitioner, however, does not 5 maintain a household for a qualifying relative. Section 6 7 8 9 2(b)(3)(B) expressly prohibits taxpayers from claiming head of household filing status when their dependents are not related by blood or marriage. Petitioner is unrelated to, and not married to Ms. Finley. Accordingly, 10 petitioner was ineligible for head of household filing 11 status for the year at issue, and we sustain respondent's 12 determination. 13 14 IV. Earned Income Section 32(a)(1) provides an eligible individual 15 with an earned income credit against that individual's 16 income tax liability. The amount of the EITC to which an 17 eligible taxpayer may be entitled is determined by the 18 19 20 21 22 23 amount of his or her "earned income" and whether the taxpayer has any qualifying children. Sec. 32(b), (c), (f). Petitioner conceded at trial that Ms. Finley was not her qualifying child for purposes of 4he fredit. 1n response, respondent agreed that petitioner may be 24 entitled to claim the EITC, with no qualifying children, 25 for the year at issue. To determine the extent to which (973) 406-2250|operations@escribers net|www.escnbers.net . (cid:16)042 10 petitioner may be eligible for the EITC, however, further calculations will be required. V. Conclusion Accordingly, a decision will be entered under Rule 155. This concludes the Court's oral findings of fact and opinion in this case. In reaching our holdings herein, we have considered all arguments made, and, to the extent not mentioned above, we conclude they are moot, irrelevant, or without merit. (Whereupon, at 3:25 p.m., the above-entitled matter was concluded.) 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 cribers (973) 406-2250|operations@escribers net|www.esaibers.net