TAX COURT OPINION

Case: Debra J. Allen-White
Docket Number: 1948-07S
Judge: Colvin
Opinion Type: bench
Filed: 07/07/2008
Pages: 5

UNITED STATES TAX COURT Washington , D .C . 2021 7 DEBRA J . ALLEN-WHITE, Petitioner, v . Docket No . 1948-07S COMMISSIONER OF INTERNAL REVENUE, 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 of the above case before Special Trial Judge Lewis R . Carluzzo at St . Louis, Missouri, on May 22, 2008, containing his oral findings of fact and opinion rendered at the conclusion of trial . In accordance with the oral findings of fact and opinion, decision will be under Rule 155 . (Signed) Lewis R . Carluzzo Special Trial Judg e Dated : Washington, D .C . July 7, 2008 SERVED ,JUL 10 2008 2 1 Bench Opinion by Special Trial Judge Lewis R . Carluzzo 2 May 22, 200 8 3 Allen-White v . Commissioner Docket No . 1948-07S 4 THE COURT : The Court has decided to render 5 oral findings of fact and opinion in this case, and 6 the following represents the Court's oral findings of 7 fact and opinion . The oral findings of fact and 8 opinion shall not be relied upon as precedent in any 9 other case . 10 This proceeding for the redetermination of a 11 deficiency is a Small Tax Case conducted pursuant to 12 the provisions of section 7463 of the Internal Revenue 13 Code of 1986, as amended, and Rules 170 through 175 of 14 the Tax Court Rules of Practice and Procedure . 15 This bench opinion is made pursuant to the 16 authority granted by section 7459(b) of the Internal 17 Revenue Code of 1986, as amended, and Rule 152 of the 18 Tax Court Rules of Practice and Procedure . 19 Hereinafter in this bench opinion, section 20 references are to the Internal Revenue Code of 1986, 21 as amended, in effect for 2004 . 22 Debra J . Allen-White appeared pro se . 23 Michael W . Bitner appeared on behalf of respondent . 24 In a notice of deficiency dated November 6, 25 2006, respondent determined a $791 deficiency i n Heritage Reporting Corporation (202) 628-4888 3 1 petitioner's 2004 Federal income tax . 2 The issue for decision is whether petitioner 3 received certain income during 2004 and failed t o 4 report that income on her 2004 Federal income tax 5 return . 6 Some of the facts have been stipulated and 7 are so found . At the time the petition was filed , 8 petitioner resided in Missouri . 9 As a result of a period of unemployment , 10 during 2004 petitioner received $2,834 in unemployment 11 compensation from the Missouri Division of Employment 12 Security . She also had an interest-bearing account at 13 First Community Credit Union and earned $22 o f 14 interest during that year from that account . 15 Neither of these items of income are 16 included in the income reported on petitioner' s 17 timely-filed 2004 Federal income tax return, which was 18 prepared by a paid income tax return preparer . 19 ._~ advised her return preparer that she had 20 received the unemployment compensation, but her return 21 preparer erroneously led her to believe that th e 22 unemployment compensation need not be reported on her 23 return . 24 In the notice of deficiency that forms the 25 basis for this case, the respondent increased Heritage Reporting Corporation (202) 628-4888 4 1 petitioner's 2004 income by the above amounts . 2 Computational adjustments were made to the earne d 3 income credit, child tax credit and additional child 4 tax credit claimed on petitioner's return as well . S With the exception of the adjustment to the 6 earned income credit, petitioner now agrees to th e 7 adjustments made in the notice of deficiency, and it 8 is clear that she should have included the interest 9 and unemployment compensation in the income reporte d 10 on her 2004 return . See secs . 61(a)(4), 85 . She 11 suggests, however, that the earned income credit 12 claimed on her return has been improperly reduced . 13 Her suggestion is well-taken, but because 14 petitioner's 2004 Federal income tax return has no t 15 been made part of the record, we cannot determine with 16 any degree of certainty whether she is correct . W e 17 note that neither interest nor unemploymen t 18 compensation fit within the definition of earne d 19 income for purposes of the earned income credit . See 20 sec . 32(c)(2)(A) ; sec . 1 .32-2(c)(2), Income Tax Regs . 21 According to the notice of deficiency , 22 "since [respondent] changed [petitioner's] adjusted 23 gross income, [respondent] also changed [petitioner's] 24 earned income credit ." A taxpayer's adjusted gross 25 income is taken into account in computing th e Heritage Reporting Corporation (202) 628-4888 5 1 taxpayer's earned income credit . See sec . 2 32(a) (2) (B) . But the terms "adjusted gross income " 3 and "earned income" are not interchangeable . Compare 4 sec . 32(c) (2) (A) with sec . 62 . 5 An increase to a taxpayer's adjusted gross 6 income does not necessarily change the taxpayer' s 7 earned income for purposes of the earned income 8 credit . Similarly, an increase to a taxpayer's 9 adjusted gross income, as in this case, does no t 10 necessarily have any effect on an earned income credit 11 to which the taxpayer is otherwise entitled . 12 Because the reduction in petitioner's earned 13 income credit is substantial (that is, $455 which is 14 over one-half of the deficiency), we expect th e 15 parties to resolve the matter in their computations 16 for entry of decision . If a disagreement arise s 17 between them as to the proper amount of petitioner's 18 earned income credit for 2004, if necessary we will 19 reopen the record to allow for the introduction of 20 additional evidence on the point . 21 To reflect the foregoing, decision will be 22 entered under Rule 155 . This concludes the Court's 23 oral finding of fact and opinion in this case . 24 (Whereupon, at 9 :55 a .m ., the bench opinion 25 in the above-entitled matter was concluded . ) Heritage Reporting Corporation (202) 628-4888