TAX COURT OPINION

Case: John Henry Stoneburg, IV & Nicole Thompson Stoneburg
Docket Number: 2849-13S
Judge: Nega
Opinion Type: bench
Filed: 11/21/2013
Pages: 7

UNITED STATES TAX COURT WASHINGTON, DC 20217 JOHN HENRY STONEBURG IV AND NICOLE THOMPSON STONEBURG, Petitioners V. COMMISSIONER OF INTERNAL REVENUE, Respondent ) ) ) ) ) Docket Nos. ) ) ) ) ) ) ORDE R 19955-12S, 2849-13S.. Pursuant to Rule 152(b), Tax Court Rules of Practice and Procedure, it is ORDERED that the Clerk of the Court shall transmit herewith to petitioner and respondent a copy of the pages of the transcript of the trial in the above case before Judge Joseph W. Nega at Washington, DC, on November 6, 2013, 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, decisions will be entered for respondent as to the deficiencies in petitioners' Federal income taxes for the taxable years 2009 and 2010, and decisions will be entered for petitioners as to the I.R.C. section 6662 accuracy-related penalties for the taxable years 2009 and 2010. (Signed) Joseph W. Nega Judge Dated: Washington, D.C. November 21, 2013 SERVED NOV 2 2 2013 Capital Reporting Company Bench Opinion by Judge Joseph W. Nega November 6, 2013 John Henry Stoneburg IV and Nicole Thompson Stoneburg 3 v. Commissioner Docket No. 19955-12S, 2849-13S THE CLERK: Calling consolidated docket numbers 19955-12S and 2849-13S, John Henry Stoneburg the IV and Nicole Thompson Stoneburg. THE COURT: The Court has decided to render oral findings of fact and opinion in this case. And the following 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 case. In this Bench Opinion all citations to sections, unless otherwise noted, are to the Internal Revenue Code for the year at issue, and citations to rules are to the Tax Court Rules of Practices and Procedure. This opinion is rendered pursuant to Section 7459(b) and Rule 152. John Henry Stoneburg IV and Nicole Thompson Stoneburg are self-represented. Rachel L. Paul represents Respondent. The Court will refer to John Henry as Petitioner husband. Respondent determined a deficiency of 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 866.488.DEPO twww.CapitalReportingCompany.com Capital Reporting Company 4 1 2 3 4 5 6 7 8 9 $4,410, and $5,087 in Petitioner's federal income tax for 2009 and 2010 respectively. Respondent also imposed a Section 6662(a) accuracy related penalty of $882, and $1,017.40 for 2009 and 2010 respectively. At trial Petitioner's conceded that they are not entitled to the child tax credit that Respondent disallowed. After the concession by Petitioner's, the two issues for decision for taxable years 2009 and 2010 are whether Petitioners may claim dependency 10 exemptions for three minor children, and whether 11 Petitioners are liable for accuracy related 12 13 14 penalties. Petitioners claimed dependency exemptions and child credits for Petitioner husband's three 15 minor children from a prior marriage on their 2009 16 17 18 19 20 21 22 23 24 25 and 2010 federal income tax returns. Petitioner husband is not the custodial parent of any of these children. Petitioners did not attach a rm 8832, elease evocation or lease of laim to xemption for hild by ustodial parent, orm 8832, or equivalent statement to either their 2009 or 2010 tax returns. A taxpayer generally is entitled to dependency exemption for a dependent who is a qualifying child, Sections 151(a), 151(c), 152(a). 866.488.DEPO twww.CapitalReportingCompany.com Capital Reporting Company 5 1 To qualify the child, amongst other requirements, 2 must have the same principal place of abode as the 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 taxpayer for more than one half of the taxable year. Section 152(c) (1). The parties agree that the other requirements of Section 152(c) (1) are satisfied in this case. In addition a non-custodial parent qualifies for the dependency exemption for a child of the custodial parent signs a written declaration releasing his or her claim to the deduction, and the non-custodial parent attaches the declaration to his or her return. Section 152(e) (2). Petitioner husband did not maintain the principal place of abode for the three minor children for 2009 or 2010. Therefore, Petitioner husband could not claim the three children as dependents unless his former spouse released her claim to the exemptions for these children, and Petitioner husband attached his former spouse's release to the tax return for each taxable year. However, Petitioner husband has provided no signed waiver for any of the three children for either 2009 or 2010. Accordingly, .22 we sustain Respondent's determination with respect to 23 24 25 the dependency exemptions. Section 6662(a) imposes a penalty upon any underpayment of tax required to be shown a taxpayer's 866.488.DEPO twww.CapitalReportingCompany.com Capital Reporting Company 6 1 2 3 4 5 return if, among other things, the underpayment is a substantial understatement, or is due to the taxpayer's negligence or disregard of rules and regulations. According to Respondent the underpayment of tax required to be shown on 6 Petitioner's return for 2010 is a substantial 7 8 9 10 11 12 understatement, and for 2009 and 2010 em alternative is due to negligence. A substantial understatement is a failure to report at least $5,000 or more of tax. The term "negligence", as used in Section 6662(a) includes "any failure to make a reasonable attempt to comply 13 with the provisions" of the Internal Revenue Code, 14 15 16 17 18 19 20 21 22 23 24 25 Section 666-2(c). The imposition of the penalty depends upon the taxpayer's intent at the time the return is filed. Respondent bears the burden of production with respect to the imposition of the negligence penalty here in dispute. See Section 7491(c). For Petitioner's 2010 tax year Petitioner failed to report over $5,000 of tax. Therefore, Respondent has satisfied his burden of production. See Section 6662(d) (1). For Petitioner's 2009 tax year, Respondent relies only on a negligence standard to apply the accuracy related penalty to the I 866.488.DEPO twww.CapitalReportingCompany.com Capital Reporting Company 7 1 Petitioner. See Section 6662 (b). Under this Section 2 3 4 5 6 7 8 9 10 11 a taxpayer is liable for a 20 percent penalty with respect to any portion of an underpayment attributable to negligence or disregard of the rules or regulations. The terms "negligence" includes any failure to make a reasonable attempt to comply with the provisions of the Internal Revenue Code. And the term "disregard" includes any careless, reckless or intentional disregard respectively. See Section 6662(c). Respondent has shown: (1), that 12 Petitioner's three minor children from his prior 13 marriage were not eligible dependents; (2), 14 Petitioners did not attach a orm 8832 or its 15 16 17 18 19 20 21 22 23 24 25 equivalent to their tax return; nd (3), Petitioners did not consult the IRS tax return instructions, which clearly state that attaching orm 8832 or its equivalent was a requisite to claiming these minor children as dependents. However, Section 6664 provides that the Section 6662 penalty will not be imposed with respect to any portion of an underpayment if the taxpayer shows: (1), that there was reasonable cause for such portion of the underpayment; and (2), that the taxpayer acted in good faith with respect to the 866.488.DEPO twww.CapitalReportingCompany.com Capital Reporting Company 8 1 2 3 4 5 6 7 8 portion of the underpayment. Petitioner husband in good faith made reasonable efforts to comply with the law, and honestly relied on tax return preparation he acquired and deployed to prepare his tax returns. We find that the Petitioners have satisfied the reasonable cause standard for their underpayment of tax for 2009 and 2010 tax years. Accordingly, we find for the 9 Petitioners with respect to the penalties for 2009 and 2010. Decision will be entered in part for the Respondent in that the deficiency is sustained, and in part .e-f Petitioners that they are not liable for the ction 6662 accuracy-related penalties. This concludes the Court's oral findings of fact and opinions in this case. (Whereupon, at 4:22 p.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 twww.CapitalReportingCompany.com