TAX COURT OPINION

Case: Juan A. Herrera
Docket Number: 17830-13
Judge: Marvel
Opinion Type: bench
Filed: 06/17/2014
Pages: 14

SEC UNITED STATES TAX COURT WASHINGTON, DC 20217 JUAN A. HERRERA, Petitioner(s), v. ) ) ) ) ) Docket No. 17830-13 COMMISSIONER OF INTERNAL REVENUE, Respondent. ) ) ) ORD ER Pursuant to Rule 152(b), 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 L. Paige Marvel at Albuquerque, New Mexico, on June 5, 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. June 17, 2014 SERVED Jun 18 2014 Capital Reporting Company 3 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 Bench Opinion by Judge L. Paige Marvel June 5, 2014 Juan A. Herrera v. Commissioner Docket No. 17830-13 THE COURT HAS DECIDED TO RENDER ORAL FINDIN S OF FACT AND OPINION IN THIS CASE, AND THE FOLLOW NG 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 OASE. This bench opinion is. made pursuant to the authority granted by section 7459(b) of the Internal Revenue Code of 1986 (Code) as amended and Rule 152 of the Tax Court Rules of Practice and Procedure. Unless otherwise indicated, subsequent section references made in this bench opinion are to the Code as amended and in effect for the year in issue, and Rule references are to the Tax Court Rules of Practice and Procedure. Some monetary amounts have been rcunded to the nearest dollar. Juan A. Herrera appeared pro se. Miles B. Fuller appeared on behalf of respondent. Respondent determined a deficiency in petitioner's Federal income tax of $3,226 for 2011. 25 After respondent asserted an increased deficiency in 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 4 1 2 3 4 5 6 an amendment to the answer, the issues for decision are: '1) whether petitioner is entitled to a dependency exemption deduction under section 151(c) for hi adult daughter, Daniela; (2) whether petitioner is entitled to use head of household filing status or whether his correct filing status is 7 married filing separately; (3) whether petitioner is 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 entitled to claim the earned-income credit (EIC) under section 32(a); and (4) whether petitioner is entitled to claim the American Opportunity Tax Credit under section 25A. FINDINGS OF FACT Some of the facts have been stipulated. The stipulations of fact and facts drawn from stipulated documents are incorporated herein by this reference. Petitioner resided in New Mexico when he petitioned this Court. Petitioner and his first wife, Gloria Consue]o Herrera, divorced in 2004. At the time of their civorce, petitioner and Gloria had two minor children--a daughter, Daniela, and a son, SH. The divorce decree provided that although petitioner and 23 Gloria were awarded joint custody over the children, 24 Gloria had physical and residential custody of the 25 children. 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 The divorce decree also addressed various tax attributes with respect·to the children. It provided that petitioner, who was the respondent in the divorce case, was allowed to claim Daniela as a dependent for the taxable year 2004 and all subsequent years thereafter, and Gloria, the petitioner in the divorce case, was entitled to claim SH as a. dependent for the same periods. Although the divorce decree is not entirely clear, it appears to provide that the above-described allocations were to continue until Daniela reached the age of 18 years old. The divorce decree further provided that once Danielä turned 18, petitioner and Gloria were entitled to claim SH as a dependent for income tax purposes in alternating year.s. The divorce decree did not contain any provision regarding the dependency exemption for Daniela after she reached the age of 18. Daniela turned 18 in 2010. Petitioner claimed a dependency exemption deduction for Daniela on his 2010 return. Respondent subsequently examined the return and disallowed the dependency exemption deduction in a notice of deficiency. Petitioner petitioned this Court and the resulting case at Docket No. 24603-12S was resolved by a stipulated 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 6 1 2 3 4 decision reflecting no deficiency due from petitioner. In 2011 Daniela, then 19, was a full-time student enrolled at the University of Texas in 5 Austin, Texas. She did not permanently reside in 6 7 8 9 10 11 12 13 14 15 16 17 petitioner's home at any time during 2011; her address as reflected on the university's records was in El Paso, TX. When she was not at the university, Danielä stayed with her mother or with her boyfriend except for two weeks in 2011 when she visited petitioner. Although petitioner would occasionally give Dêniela some money for school expenses, which he estimated at trial totaled $3,000, he had no documentation of the payments and was not sure what she used the money for. Gloria claimed Daniela as a dependent on her 2011 return. In 2011 petitioner. was married to Ruth 18 Herrera. He and Ruth were not legally separated in 19 20 21 22 23 24 2011 but began to live apart from each other on May 7, 2011. Petitioner timely filed his 2011 Federal income-tax return. On his return he claimed head of household filing status and he claimed a dependency exemption deduction with respect to Daniela. 25 Petitioner stated on the return that Daniela lived 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 7 1 with h m for 10 months during 2011. Petitioner also 2 3 4 5 claime an earned-income-tax credit on the assumption that D niela was a qualifying-child and his depend nt, and he claimed $4,000 as qualifying expens s for the American Opportunity Tax Credit. 6 Petiti ner attached several documents to his 2011 7 8 return -a copy of the Final Decree of Divorce, a worksheet with respect to child support, a copy of an 9 Order of Modification, and a Form 8332, 10 Release/Revocation of Release of Claim to Exemption 11 12 13 for Ch ld by Custodial Parent, in which Gloria released to petitioner the dependency exemption for SH for 2009, 2010, 2012, 2014, 2016, and 2018. 14 Petitioner did not attach a Form 8332 with respect to 15 16 17 18 19 20 21 22 DanielE. Respondent examined petitioner's 2011 return. Following the examination, Respondent issued to petitioner a notice of deficiency changing petitioner's filing status from head of household to single, disallowing petitioner's claimed earned- income tax credit, and disallowing petitioner's claimec American Opportunity Tax Credit relating to 23 Daniela. 24 25 Before trial respondent moved to assert an increased deficiency in an amendment to answer. We 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 8 granted respondent's motion. In the amendment to answer respondent asserted that petitioner was not entitled to claim Daniela as a dependent and that his proper filing status was married filing separately. ANALYSIS I. Burden of Proof Generally, the Commissioner's determination of a deficiency is presumed correct, and the taxpayer bears he burden of proving that the determination is improp r. Rule 142(a)(1); Welch v. Helvering, 290 U.S. 111, 115 (1933). However, if the Commissioner raises a new matter, seeks an increase in a deficiency, or asserts an affirmative defense, the Commissioner has the burden of proof as to the new 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 matter or increased deficiency. Rule 142(a)(1). In 16 17 18 19 20 21 22 23 24 25 this case respondent bears the burden of proof on the first two issues and petitioner bears the burden of proof cn the last two issues. II. Cependency Exemption Deduction Section 151(c) permits a taxpayer to claim as a deduction an exemption for each dependent as that term is defined under section 152. Section 152(a) provides that a dependent must be either a qualifying child or a qualifying relative. Section 152(c)(1) defines a qualifying child as a child who 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 9 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 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. A child satisfies the specified relationship requirement if the child is a child of the taxpayer. Sec. 151(c)(2). Section 152(d)(1) defines a qualifying relative as an individual who bears a qualifying relationship to the taxpayer; whose gross income for the year is less than the section 151(d) exemption amount; who receives over one-half of his or her support from the taxpayer for the taxable year; and who is not a qualifying child of the taxpayer or of any other taxpayer for the taxable year. An individual bears a qualifying relationship to his or her parent. Sec. 152(d)(2) (A). Section 152(e)(1) provides a special rule for divorced or legally separated parents which permits a noncustodial parent, under certain circumstances, a dependency exemption deduction for a child. As relevant to this case, section 152(e)(2) allows the noncustodial parent to claim a dependency exemption deduction for a child if (1) the custodial parent signs a written declaration that such custodial parent will not claim such child as a 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 10 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 dependent for any taxable year beginning in such taxable year, and (2) the noncustodial parent attaches such written declaration to the noncustodial parent's return for the taxable year beginning during such taxable year. The declaration required by section 152(e)(2) must be made on either Form 8332 or on a statement conforming to the substance of that form. Miller v. Commissioner, 114 T.C. 184, 189 (2000), aff'd on another ground sub nom., Lovejoy v. Commissioner, 293 F.3d 1208 (10th Cir. 2002); sec. 1.152-4(e)(1), Income Tax Regs. The regulations provide that the declaration must be attached to the return for each year that a taxpayer claims the dependency exemption. Sec. 1.152-4(e)(2), Income Tax Regs. Petitioner maintained that he is entitled to the. dependency exemption for Daniela for 2011 because the divorce decree entitled him to claim it and because he prevailed in Tax Court litigation for 2010 on this same issue. We disagree for several reasons. First, the divorce decree is silent about the dependency exemption for Daniela after she attained the age of 18. Second, petitioner did not attach a Form 8332 to his 2011 return on which the custodial parent, Gloria, released the dependency 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 11 1 2 3 4 exempt:.on deduction for Daniela to petitioner. In fact, loria claimed the dependency exemption deduction for Daniela on Gloria ' s 2011 return. Third, the disposition of the Tax Court litigation 5 with respect to 2010 is not binding on the Court with 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 respec to 2011. See Commissioner v. Sunnen, 333 U.S. 5 1, 597 (1948) (holding that each tax year is the origin of a new liability and a separate cause of action). Neither party has asserted that the doctrine of collateral estoppel applies, m Rule 39, A and we are not privy to the facts underlying the settlement of the prior litigation. In summary, Daniela was not a qualifying child of petitioner because she did not live with petitioner in 2011; petitioner did not attach a Form 8332 w th respect to Daniela to his 2011 return; and the di orce decree (to the extent that it may have conformed in substance to a Form 8332) did not provide that petitioner would have the exclusive right to claim Daniela as a dependent for 2011. Daniela was also not a qualifying relative of petitioner in 2011 because the record and inferences drawn from the record have convinced us that petitioner did not provide over one-half of her support in that year. Petitioner testified that he 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 1 2 3 4 only gave Daniela approximately $3,000 for expenses during 2011. Petitioner did not pay for Daniela's living expenses, such as lodging, food, clothes, tuitior , books, and related items, and he did not 5 maintain a household for Daniela. 6 7 Because Daniela was not a qualifying child or a qualifying relative of petitioner within the 8 meaning of section 152 during 2011, petitioner is not 9 entitled to a dependency exemption deduction for 10 Daniela in 2011. 11 12 13 14 15 16 17 III. Filing Status Section 1 imposes a Federal income tax on individuals at progressive rates that are determined by ref rence to the taxpayer's taxable income and filing status. For Federal income tax purposes, an individual's marital status is determined at the close of the taxable year. Sec. 7703(a)(1). A 18 married individual may nonetheless be considered 19 20 21 22 23 24 25 unmarr ed for Federal income tax purposes where the follow ng four-part test is met: (1) the individual files separate return; (2) the individual, for more than one-half of the taxable year, maintains as his or her home a household that serves as the principal place of abode of a child who is the individual's dependent under section 151; (3) the individual 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 13 1 furnishes more than one-half of the cost of 2 maintaining such household during the taxable year; 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 and (4) the spouse was not a member of the household during the last six months of the taxable year. Sec. 7703(b). Because Daniela was not petitioner's dependent in 2011, petitioner is not entitled to be treated as unmarried for filing purposes for that year. Sec. 7703(b). Accordingly, because petitioner was married during 2011 and did not elect to file a joint eturn with his wife for that year, petitioner was required to file his 2011 return using a filing status of married filing separately. IV. Earned Income Credit Taxpayers who qualify for the earned income credit generally fall into two categories; those with one or more qualifying children and those with no qualifying children. Sec. 32(c)(1) (A)(i.) and (ii). The earned income credit is more generous for taxpayers who have one or more qualifying children. Sec. 3 (b). For purposes of section 32, the term "qualifying child" generally means a qualifying child of the taxpayer as defined in section 152(c). Sec. 32(c)( )(A). Because petitioner did not have a 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 14 1 2 qualifying child in 2011, he is not entitled to claim the more generous earned income credit for that year. 3 Accordingly, we sustain respondent's disallowance of 4 5 6 petitioner's claimed earned income tax credit. V. American Opportunity Tax Credit The American Opportunity Tax Credit is a 7 modified version of the Hope Scholarship Credit and 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 is in effect from 2009 to 2018. Sec.. 25A(i). The American Opportunity Tax Credit provides for a credit against tax equal to 100% of so much of the qualified tuition and related expenses paid by the taxpayer during the taxable year as does not exceed $2, 000, plus 25% of such expenses so paid as exceeds $2,000 but does not exceed $4,000. Sec. 25A(i)(1). If the taxpayer is a married individual within the meaning of section 7703, the credits under section 25A apply only if the taxpayer and the taxpayer's spouse file a joint return for the taxable year. Sec. 25A(g)(6). Petitioner testified that he gave Daniela approximately $3,000 for educational expenses in 2011. However, petitioner did not corroborate his testimony, and we do not find his testimony on this issue to be convincing as to either the amount or the use of the payments. Petitioner has therefore failed to substantiate his entitlement to the American 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 15 1 Opportunity Tax Credit for 2011. Rule 142(a)(1). 2 Additionally, petitioner is not entitled to claim the 3 4 5 6 7 8 American Opportunity Tax Credit because petitioner was married to Ruth in 2011 and they did not file a joint return. Sec. 25A(g)(6). Because petitioner could not claim Daniela as his dependent for 2011, petitioner is not entitled to be treated as unmarried for filing purposes for that year. Sec. 7703(b). 9 Accordingly, we sustain respondent ' s disallowance of petitioner's claimed American Opportunity Tax Credit for 2011. We have considered the parties' remaining arguments and, to the extent not discussed above, conclude that those arguments are irrelevant, moot, or without meri.t. To reflect the foregoing, decision will be entered for respondent. THIS CONCLUDES THE COURT'S ORAL FINDINGS OF FACT AND OPINION. (Whereupon, at 9:25 a.m., the above- entitled matter was concluded.) 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 866.488.DEPO www.CapitalReportingCompany.com