TAX COURT OPINION

Case: William Wilton Richardson
Docket Number: 9242-11S
Judge: Gustafson
Opinion Type: bench
Filed: 11/02/2011
Pages: 13

UNITED STATES TAX COURT WASHINGTON, DC 20217 RMM WILLIAM WILTON RICHARDSON, Petitioner, v. Docket No. 9242-11S. COMMISSIONER OF INTERNAL REVENUE, Respondent O R D E R 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 to respondent a copy of transcript of Gustafson at Cheyenne, Wyoming, on October 24, 2011, containing his oral of in the above case before Judge David fact and opinion rendered at the pages of the the conclusion the trial findings of the trial. In accordance with the oral findings of fact and opinion, decision will be entered for respondent. (Signed) David Gustafson Judge Dated: Washington, D.C. November 2, 2011 SERVED Nov 02 2011 IN THE UNITED STATES TAX COURT In the ma ter of : ) . WILLIAM W TON RICHARDSON, Petitioner, v. . COMMISSIO ER OF INTERNAL REVENUE . Re spondent . ) ) ) ) Docket No. 9242-11S ) ) ) US Bankruptcy Court J. C. O Mahoney Federal Center 2120 Capitoli Avenue Cheyenne, *Wyoming Monday, October 24, 2011 Th above entitled matter came on for bench opinion, pursuant to notice, at 1:45 p.m. BE ORE: HÓNORABLE DAVID GUSTAFSON Judge AP EARANCES: Fo the Petitioner: (N Appearance . ) Fo the Re spondent : (N Appearance . ) Heritage Reporting Corporation (202) 628-4888 R I N Q S_ 2 (1:45 p.m.) (cid:16)042 THE CLERK: Recalling from the calendar Docket No. 9242-11S, William Wilton Richardson. (Whereupon, a bench opinion in the above- entïtled matter was rendered as follows:) // // // // // // // // // // // // // // // // // // // Heritage Reporting Corporation (202) 628-4888 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 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 Bench Opinion by Judge David Gustafson Richardson v. Commissioner Docket No. 9242-11S October 24, 2011 THE COURT: The Court 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, which shall not be relied on as precedent in any other case. This Bench Opinion is made pursuant to the authority granted by section 7459 (b) of the Internal Revenue Code, and Rule 152. of the Tax Court Rules of Practice and Procedure . By a statutory·notice of deficiency dated March 11, 2011 (Ex. 2-J) , the IRS determined a deficiency in the Federal income tax of petitioner William Nilton Richardson for tax year 2008, in the amount of $1,524.52. The issue in dispute is Mr. Richardson's. entitlement to a dependency exemption deduction and child tax credit for his daughter. . For the reasons explained hereafter, we must sustain the deficiency determined against Mr. Richardson. Trial of this case was conducted on October 24, 2011, in. Cheyenne, Wyoming. The parties Stipulati.on of Facts, with Exhibits 1-J through 4-J, was admi:ted into evidence and is incorporated herein. 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 Mr. Richardson testified and his testimony was forthricht and crediblé and.he offered Exhibits 5-P through 8-P, which wère received into evïdence without objecticn. We find the following facts: Findings of Fact At the time he filed his petition, Mr. Richardson resided in Wyoming. (Stip. 1.) Mr. Richardson was previously married to Natalie Richardson, and they have one daughter (Stip. 7), whom we will refer to by her initials, I.R., to protect.her pritacy. I.R. was born in 2006. (Stip. 8.) Mr. and Ms.. Richardson were divorced in March 2008. (Stip. 6.) In= the divorce decree, Mr. Richardson was awarded joint legal .custody of. I.R. with her maternal grandparent s, Elias and Nadera . Abounader . The Abounade rs were awarded phys ical cus tody of I . R . , and Mr. Rich±rdson was granted visitation rights. During 2008, I.A.. resided primarily (that is, for more than one-half of the year) with the Abounaders in Missouri (Stip. 9), and she resided with Mr. Richardson for about.103 days. So far as the record shows, Ms. Richardson had no_legal or physical custody of or any vis itation rights with respect to I . R . However, Ms. Richardson resided with her parents, so in fact Heritage Reporting Corporation (202) 628-4888 5 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 she sha ed an abode with I.R. for most of 2008. Mr . Richardson. provided various forms of financi l support for I.R , including payment for health care and . Other extraordinary expenses, as well as child support in the ·amount of $400 per month that he paid¡to the Abounaders. (Exs. 7-P, 8-P.) We assume for purposes of this opinion that Mr. Richardson provided the majority of the financial support for I.R. in 2008. On his tax return for 2008, Mr. Richardson claimed a dependency exemption deduction and child tax credit f or I.R. (Ex. 1-J) and claimed a refund of the resulting overpayment of tax. The IRS initially granted that refund, but it later disallowed Mr.: Richardson's claim of the dependency exemption deducticn and the child tax credit for I.R. and determined a tan deficiency of $1,524.52. (Ex. 2-J.) 18. Mr. Richárdson filed ja petition in this Court 19 20 21 22 23 24 25 challenging those disallowances . opiñion The IRS's. determination is presumed correct, and generally the taxpayer bears the burden to prove his entitlement to the exemptions and credits he claimed. Rule 142 (a) ; Welch v. Helvering, 290 U. S. 111, 115 (1933) . Mr. Richardson does not contend that 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 the burden of proof . has shif ted under section 7491 (a) , and the record does .not suggest any basis for such a 6 shift. Dependency exemption deduction Section 151(a) of the Internal Revenue Code provide for a deduction for certain exemption amounts Section 151(c) allows an exemption for "each individual who is a dependent (as defined in section 152) " . . Section 152 (a) provides that "dependerit" means either "a qualifying child" (as defined in section 152(c)) or "a qualifying relative" (as defined in section 152 (d)) . In addition, section 152 (e) of the Code includes a "Special Rule for Divorced Parents, Etc. " Mr. Richardson must satisfy one. of these three provisions to claim I.R. as a depencent for tax year 2008: 1. Section 152 (e) : Special Rule for Divorced Parents Section 152 (e) (1) provides a special rule for divcrced parents, which rule applies where the child ie "in the custody of 1 or both of the child's parents for more than one-half of the calendar year". Sec . 152 (e ) (1) (B) . I ..R . did evidently reside with Ms. Richardson for more than half of the year in the Abounaders' house; however, the statute applies only 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 where the child.was in a parent's "custody", not merely when they share an abode; and "custody" exists only where a parent has "the right under state law to physica:. custody of the child", 26 C.F.R. sec. 1.:.52-4 (c), which right Ms. Richardson lacked. Even if Ms. Richardson did have custody, section 152 ( ) (i) would not provide a basis for Mr. Richardson to prevLil, since Mr. Richardson did not attach to his 2008 ret urn (as required by section 152 (e) (2) (B) ) a Form 8322, the form prescribed for the custodial spouse t o release her claim to the exemption, pursuant to secti on 152 (e) (2) (A) . Where a child of divorced parents is in the custody of non-parents for more than one-half of the year (aE I.R. was), section 152(e) will not apply, and whether the child is the "qualifying child" or "qualifying relative" of any taxpayer (including either cf the parents) must be determined under section 152 (c) or (d) . See 26 C. F. R. sec. 1.152-4 (g) , Example 3. We therefore progeed to that analysis. 2. Section 152 (c) : Qualifying Child A ''qualifying child" must meet four requirements for the taxpayer to qualify for the deduction. See sec . 152 (c) (1) (A) - (D) . The pertinent factor here is the residency requirement: the child Herita e 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 must have the same prïncipal place of abode as the taxpayer for more than one-half of the taxable year. Sec. 153(c) (1) (B). Mr. Richardson acknowledged that I.R. lived with him for less than one-half of 2008 and lived w:.th her maternal grandparents for more than one-half of the year. Thus, I.R. is not a "qualifying child" of Mr. Richardson for purposes of section 152(c). 3. Section 152(d): Qualifying Relative A "qualifying relative" must satisfy four requirements in order for the taxpayer to qualify for the dedtction. See sec. 152(d) (1) (A)- (D). We assume .that I.E. passes the first three tests, which we therefole do not discuss here. However, the last test, fcund in section 152(d) (1) (D), requires that the child claimed as a "qualifying relative" (here, I.R.) must be someone "who is not-a qualifying child of such taxpayer or of any other taxpayer" for that year. (Emphasis added.) Thus, if I.R. was a "qualifying child" cf any other taxpayer (such as her maternal grandparents, the Abounaders) for tax year 2008, then for that year she cannot be a "qualifying relative" of Mr. Richardson under section 152(d). We find that I.R. was a "qualifying child" of the Abounaders as defined under section 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 21 152(c) (1) (A)-(D). First, I.R. is the granddaughter of the Abotnaders. This is a sufficient relationship (as describcd in paragraph 152(c) (2)) to the Abounaders to satisfy the "relationship test" of section 152(c) (2) (A). Second, I.R. lived with the Abounaders for more than one-half of 2008, thereby satisfying the "resider.cy requirement" of section 152(c) (1) (B). Third, J.R. was still a toddler in 2008, thereby satisfying the "age requirement" of section 152(c) (1) (C). And lastly, there is no evidence that I.R. prcvided over-one-half of her own support in 2008, thereby satisfying the "support requirement" of section 152 (c) (1) (D) . Since I.R. is thus a "qualifying child" of the Abounaders for 2008, she cannot, by the express terms of section 152(d) (1) (D), be a "qualifying relative" of Mr. Richardson for 2008. Because I.R. is not a "qualifying child" or "qualifying relative" of Mr. Richardson, he may not claim I.R. as a dependent for tax year 2008. Under the plain terms of the statute, we must hold against him. 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 10 Child tax credit Section 24 provides for a tax credit for "each qualifying child of the taxpayer". A "qualifying child" for purposes of section 24 is the same "qualifying child" as defined in section 152(c) who has not attained the age of 17. Because we have already determined that I.R. is not a "qualifying child" of Mr. Richardson for purposes of section 152(c), he is likewise not entitled to a child tax credit for I.R. for 2008. Conclusion In section 152, Congress has created several objective tests that draw bright lines. The alternative would be rules that are sensitive to the wide variety of family circumstances, but such sensitive rules would be difficult for the IRS and the courts to administer, and such sensitive rules might require Government intrusion into delicate family matters. The Tax Court is required to apply the law as passed by Congress, and the rules of section L52(c), (d), and (e) are explicit: Section 152 prevents a parent in Mr. Richardson's circumstance from claLming a dependency exemption deduction or child ta:< credit for his daughter, irrespective of how 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 11 much fi:2ancial support he provided. Consequently, the deficiency as determined by respondent will be sustained. This concludes the Court's oral Findings of Fact and Opinion in this case . (whereupon, at 1:54 p.m. , the bench opinion in the 2.bove-entitled matter was concluded. ) // // // // // // // // // // // // // // // // // // Heritage RepoYting Corporation (202) 628-4888 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 176 18 19 20 21 22 23 24 12 Certificate of Transcriber and Proofreader CASE NAME: William Wilton Richardson DOCKET NUMEdER.: 9242-11S We, the undersigned, do hereby certify that the foregoing pages, numbers 1 through 11 , inclusive, are the true, accurate and complete transcript prepared from the verbal recording made by electronic recording by Marcene Ness , on October 24, 2011 before the United States Tax Court at its session in Chevenne, Wyoming , in accordance with the ap:plicable provisions of the current verbatim reporting contract of the Court, and have verified the accuracy of the transcript by comparing the typewritten transcript against the verbal recording. 10/28/11 Laurel H. Stoddard .. (Transcriber) (Date) .. 10/28/11 Elizabeth Stoddard (Proofreader) (Date) Heritage Reporting Corporation (2.02) 628-4888