TAX COURT OPINION

Case: Patricia M. Rodriguez
Docket Number: 6261-16S
Judge: Holmes
Opinion Type: bench
Filed: 11/10/2016
Pages: 11

Orn 5 UNITED STATES TAX COURT WASHINGTON, DC 20217 PATRICIA M. RODRIGUEZ, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent ) ) ) ) ) ) ) ) ) O R D E R Docket No. 6261-16S. Pursuant to Rule 152(b), Tax Court Rules of Practice and Procedure, it is ORDERED that the Clerk of the Court shall transmit herewith the pages of the to petitioner and to respondent a copy of transcript of the trial in the above case before Judge Mark V. Holmes at El Paso, Texas, on November 1, 2016, containing his oral at which the case was heard. fact and opinion rendered at findings of the trial session In accordance with the oral findings of fact and opinion, a decision under Rule 155 will be entered. (Signed) Mark V. Holmes Judge Dated: Washington, D.C. November 10, 2016 SERVED NOV 7 620f6 Capital Reporting Company 3 1 2 Bench Opinion by Judge Mark V. Holmes November 1, 2016 3 Patricia M. Rodriiguez v. Commissioner 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 Docket No. 6261-16S In the case of Patricia M. Rodriguez v. Commissioner, Docket Number 6261-16S, the Court has decided to render oral findings of fact and opinion, and the following is the Court's oral findings of fact and opinion. This bench opinion is made pursuant to the authority granted by Section 7459(b) of the Internal Revenue Code of 1986, as amended, and Rule 152 of the Tax Court's Rules of Practice and Procedure. Ms. Rodriguez was a resident of Texas when she filed her petition and remains one to this day. She, too, was able to reach a stipulation with the Government that, together with the testimony of herself and her two witnesses, constitutes the record of the case. There were two issues. One is whether she received business income of $13,000 as a waitress that she reported on her Schedule C. The second is 23 whether she is entitled to receive an array of tax 24 25 benefits for the care of small children -- I will use the initials MB and LPB -- for the 2014 tax year. 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 4 1 2 3 4 5 6 7 8 9 10 11 I'll take these in order. First up is the $13,000 in income she alleged received as a waitress and that she reported, oddly enough, on her Schedule C. Here there were real credibility problems. Ms. Rodriguez didn't know the full name of her employer. The business that she worked at was a bar that has closed; there were absolutely no written records of her employment there. There was no report by her employer of any . wages paid, there was no report of tip income, and that caused her tò use the wrong part of the form 12 which she reported her self-employment tax. 13 14 15 16 Even the amount of income, in exact amount of $13,000, suggests credibility problems. Few people have wages that end with three zeros. Moreover the characterization of 17 waitressing income as Schedule C income and the 18 19 20 21 22 23 24 25 amount have the effect of greatly increasing the tax benefits of reporting that she cared for these two small children. She had to take a hit on increased self- employment tax, but because $13,000 is so small in conjunction with the 1600 or so that she earned and that was reported by her employer that year, she was greatly magnifying the tax benefits available to her, 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 5 1 2 3 4 5 6 7 getting no income tax, but a net gain of over $6,000 in payments from the federal government if she was to be believed on this extra income that she said she received. She did, as I say, have to pay up an extra amount of self-employment tax, but that was swamped by the benefits that the tax system gives to the 8 working poor if they can prove that they earned some 9 income. 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 But here I just don't believe that she proved that she received this 13,000 in income from an employer whose name she doesn't know at a place of employment which no longer exists and for which there were absolutely no records whatsoever. The second issue were these, as I said, tax benefits of caring for MB and LPB. These come in four categories. One is dependency exemptions; the other is earned-income credit, the additional child tax credit, and finally filing status, all of which are affected by whether MB and LPB were, in the year 2014, her qualifying children or qualifying relatives as that term is used in the tax code. Much, much of this issue depends on the extremely tangled family relationship that the 25 Rodriguezes face. I find as a matter of fact, more 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 6 1 2 likely than not, that MB and LPB were both small children during the 2014 tax year. They were both 3 birthright-citizen children. Their biological 4 mother, who testified, Ms. Karina Rodriguez, is their 5 6 7 8 9 10 11 12 13 mom. Their biological father, Mr. Efrain Bustamante, is their father. Neither of them are here in the country legally, and their unlawful presence might have affected the ability of the Rodriguezes to claim these children and some of the tax advantages that caring for small children have. The mom and father of MB and LPB were not legally married and were not cohabitating through the 2014 year. Instead, Ms. Karina Rodriguez was living 14 with Ms. Patricia Rodriguez and her own father, 15 16 17 18 19 Alonso Rodriguez. Mr. Alonso Rodriguez has been in the country for a long time and is also not lawfully present here. Ms. Rodriguez is lawfully present here, and during 2014, Mr. Alonso Rodriguez and Ms. 20 Patricia Rodriguez were living together, and Ms. 21 Patricia Rodriguez had no biological connection to 22 23 these small children. A lot depends on whether Mrs. Rodriguez was 24 married to Mr. Rodriguez during the year in question. 25 Mr. Rodriguez's own marital history is quite tangled. 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 7 1 2 3 4 5 6 He testified -- and I find him credible on this -- that he was born in September of 1966 and that in 1985, while still a teenager, he legally married a woman named Margarita Balderas in Mexico. According to the testimony of his daughter, they divorced in 1994. According to the testimony of 7 Mr. Rodriguez himself, they never really divorced, 8 9 10 11 12 13 14 15 16 17 but Ms. Balderas died in 2014. After he left Ms. Balderas, or perhaps after he divorced Ms.. Balderas back in 1994, he "informally married" a woman named Sandra Salazar, and they lived together from '94 to 2004. According to the testimony of his daughter, this was a marriage but an informal marriage, which is recognized, as I'll get into, under Texas law. According to Mr. Rodriguez, he was also "informally married" to Ms. Salazar. In addition, 18 Mr. Rodriguez testified he was informally married for 19 20 21 some months to another woman named Noemi, whom he didn't remember the last name of, in 2007 and in 2010 began what he called an informal marriage with Ms. 22 Patricia Rodriguez, the taxpayer in this case. 23 24 25 Now, as I said, Texas does recognize the concept of informal marriage. Texas Family Code Annotated Section 2.401 says, "In a judicial, 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 8 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 administrative, or other proceeding, the marriage of a man and woman may be proved by evidence that the man and woman agreed to be married and, after the agreement, they lived together in the state as husband and wife, and there represented to others that they were married." One of these elements, "represented to others," has a meaning that's been developed in state law as requiring holding out to the public that a couple if married. And it has to be both members of the couple who hold themselves out to the public. See Erin v. Phares, 39 SW 3d 708. In this case Ms. Rodriguez and Alonso Rodriguez didn't share utility bills. There was no evidence that they were making a representation that they were married to the community generally. She filed her tax return claiming the status of single rather than married filing separately or married filing jointly. And although she testified -- and I believe her -- that the little children who generated the tax benefits here called her Abuela or Abuelita and her family blessed her somewhat irregular union with Mr. 24 Rodriguez, this is insufficient, I find, on the facts 25 of this case, to establish that they were 866.488.DEPO www.Capita1ReportingCompany.com Capital Reporting Company 9 1 2 3 4 5 6 7 8 9 representing to others -- by which I mean holding out to the public -- that they were in fact married. Moreover, as an alternative holding on this issue, which is central to the case, I have to note that although Texas recognizes informal marriage, it does not recognize informal divorce. If Ms. Karina Rodriguez is to be believed, her father divorced his first formerly married wife in Mexico in 1994 and began living with a Sandra 10 Salazar in an informal marriage that lasted at least 11 until 2004, but there is no record of a divorce or 12 assertion of her death that would end that informal 13 marriage. 14 15 16 17 18 19 20 Now, I recognize that Texas law also has a two-year statute of limitations, such as it is. That's a rebuttable presumption, and nobody has rebutted it here. Indeed, all the testimony that I had on the point of the informal Salazar marriage indicated that it was not denied by either party and indeed it was affirmed as a kind of informal 21 marriage. 22 Now, of course it would be an informal 23 marriage even under Texas law only if Mr. Rodriguez 24 25 is not to be believed that he never divorced his first wife, Ms. Balderas, because of course Texas 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 10 1 does not allow a person to be a party to an informal 2 marriage if he is married to somebody else at the 3 4 5 6 7 8 9 10 11 12 time he enters into that informal marriage. See Texas Family Code Annotated 2.401(d). Now, if Mr. Rodriguez is to be believed, he never divorced Ms. Balderas, which meant that he did not have a informal marriage with Ms. Salazar that would be recognized under Texas law. However, Ms. Balderas, according to his testimony, died sometime in 2014, so perhaps he had an informal marriage that began at that point with Ms. Patricia Rodriguez through the removal of the impediment of his former 13 marriage to Ms. Balderas. 14 15 16 17 18 19 20 21 22 23 24 25 But I have to conclude that it is more likely than not that he was not married informally to Ms. Patricia Rodriguez under Texas law. The filing status, in other words, in this case really truly is single, despite what the IRS asserted as an alternative holding in this case. And once I've concluded that Ms. Patricia Rodriguez is not informally married under Texas law to Mr. Alonso Rodriguez, she lacks the biological connection or the connection through marriage that would make MB or LPB her qualifying children, so that means that she doesn't qualify for the earned-income 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 11 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 credit, because she has no qualifying children, because a qualifying child of the taxpayer must be a child of the taxpayer or a descendant of such child or a brother, sister, step-brother or step-sister of the taxpayer, or a descendant of any of those relatives. See Section 152(c)(2). This also precludes Ms. Patricia Rodriguez from claiming the additional child tax credit for the same reason: She doesn't have a qualifying child. That leaves only the dependency exemption. The rules for qualifying for a dependency exemption are a little bit broader than those for the additional child tax credit or the earned-income credit. Ms. Rodriguez must establish that MB and LPB were her qualifying relatives under Section 152(d). Specifically under Sections 152(d)(1)(C) and 152(d)(2)(H) she had to establish that she provided over one-half of the support for them and that she 20 maintained the household where she and they lived 21 22 23 24 together the entire 2014 tax year. I'm prepared to find that she did live with MB and LPB during the entire 2014 tax year. The problem is that I can't find proof that she provided 25 more than half the support for those kids. 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 12 1 All of the adults in that household, which 2 might even include Mr. Alonso Rodriguez's brother, 3 4 5 6 7 8 9 who is listed on the utility bill, were engaged in informal earning, clearly, in the underground economy. And with this sort of off-the-books income, it was very hard to determine who is earning what and in what amounts and in what proportions. It's just quite impossible for me to conclude that Ms. Patricia Rodriguez was contributing 10 more than one-half of the support for this crowded household, and under 152(d)(1) (C), that means I have to rule against her for the personal dependency exemptions as well. The Government did make a concession on one point that I haven't discussed here but that's listed in the pretrial memo, so a decision in this case, too, will be entered under Rule 155. This concludes the Court's oral findings of fact and opinion in this case. (Whereupon, at 9:56 a.m., the above- entitled matter was concluded.) 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 866.488.DEPO www.CapitalReportingCompany.com