TAX COURT OPINION

Case: Pedro Monge-Ramirez
Docket Number: 1302-17S
Judge: Morrison
Opinion Type: bench
Filed: 12/21/2017
Pages: 10

UNITED STATES TAX COURT WASHINGTON, DC 20217 PA PEDRO MONGE-RAMIREZ, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent Docket No. 1302-17S. ORDER OF SERVICE OF TRANSCRIPT Pursuant to Rule 152(b), Tax Court Rules of Practice and Procedure, there is transmitted herewith to petitioner and to respondent a copy of the pages of the transcript of the trial of the above case before Judge Richard T. Morrison, at Denver, Colorado, on October 4, 2017, containing his oral findings of fact and opinion rendered at the conclusion of trial. In accordance with the oral findings of fact and opinion, a decision will be entered. (Signed) Richard T. Morrison Judge Dated: Washington, D.C. December 21, 2017 SERVED Dec 22 2017 3 1 2 3 4 5 6 7 8 9 Bench Opinion by Judge Richard T. Morrison October 4, 2017 Pedro Monge-Ramirez v. Commissioner of Internal Revenue Docket No. 1302-17S 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 esed not be relied on as precedent in any other case. 10 This proceeding was heard as a Small Tax Case 11 pursuant to the provisions of section 7463 of the Internal 12 Revenue Code of 1986, as amended, and Rules 170 through 13 14 174 of the Tax Court Rules of Practice and Procedure. This bench opinion is made pursuant to the 15 authority granted by section 7459(b) of the Internal 16 Revenue Code of 1986, as amended, and Rule 152 of the Tax 17 Court Rules of Practice and Procedure. 18 19 In this bench opinion, all section numbers refer to the Internal Revenue Code of 1986, as amended and in 20 effect for 2013 and 2014, the tax years at issue. All 21 _rule numbers refer to the Tax Court Rules of Practice andy 22 Procedure. 23 For the 2013 tax year, Respondent, the 24 Commissioner of Internal Revenue, determined a deficiency 25 of $5,214 and a section 6662 penalty of $1,042.80. For 973)406-2250|operations@escribersmet|www.escribersmet the 2014 tax year, Respondent determined a deficiency of $6,609 and a section 6662 penalty of $1,321.80. 4 FINDINGS OF FACT Some of the facts are stipulated, and they are so found. During 2013 and 2014, the Petitioner, Mr. Pedro kngo-Ramirez, was married to Ms. Esmeralda Orozco. On RF his tax returns for the 2013 and 2014 tax years, the Petitioner claimed head-of-household status. He also 1 2 3 4 5 6 7 8 9 10 claimed the standard deduction and the child care credit 11 12 13 14 on each return. Orozco filed her own tax returns for each year using married-filing-separately status. She claimed itemized deductions for each year. The Respondent issued a notice of deficiency for 15 the 2013 to 2014 tax years, determining that the 16 Petitioner was not entitled to head-of-household status, 17 18 the standard deduction, or the child care credit. With computational adjustments, these determinations resulted 19 in deficiencies in the amounts already stated. The notice 20 of deficiency also reflected the previously stated 21 22 determinations regarding section 6662 penalties. The Petitioner resided in Colorado when he 23 filed his petition. His petition was timely, and we have 24 25 jurisdiction under section 6213(a). 1. Burden of Proof as to the Deficiency (973)406-2250|operations@escribers.net|www.escribers.net In general, the Petitioner bears the burden 5 of proving the Respondent's determinations are incorrect. Rule 142(a), Welch v. Helvering, 290 U.S. 111, 115 (1933). However, the burden of proof is imposed on the Respondent if the requirements of section 7491(a) are met. It is unnecessary to determine which party bears the burden of proof because all findings of fact are based on a preponderance of evidence. 2. Head-of-Household Status 1 2 3 4 5 6 7 8 9 10 Under section 2(b) (1), an individual cannot 11 qualify for head-of-household status if he is married at 12 the close of the tax year. Under section 7703(b), a 13 married individual filing a separate return is considered 14 not married if three requirements are met. See section 15 2(c). First, the individual must maintain a household 16 17 18 that is the principal place of abode of at least one dependent child for more than one-half of the tax year. Second, the individual must furnish over one-half of the 19 cost of maintaining that household during the tax year. 20 Third, during the last six months of the tax year, the 21 22 23 individual's spouse must not be a member of the individual's household. The Petitioner was married to Orozco at the 24 close of each of the two tax years at issue, 2013 and 25 2014. Therefore, to qualify for head-of-household status, Cribers (973)406-2250|operations@escribers.netlwwwescribers.net the Petitioner must meet the three requirements of section 6 7703(b). In his opening statement, the Respondent explains that his only challenge to the Petitioner's qualification for head-of-household status is that the third requirement is not met. In order for the third requirement to be met, the Petitioner's spouse, Orozco, must not be a member of the Petitioner's household during the last tMr-ee months [#4] of each of the two years at issue, 2013 and 2014. The following chronology of where Orozco lived during the two years is based on the Petitioner's credible testimony. At the beginning of 2013, the Petitioner and 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Orozco shared a house in Ft. Morgan, Colorado, on Circle 16 Drive. 17 18 19 20 21 22 In February of 2013, Orozco moved out of the house. In June 2013, she moved back in and remained in the house for roughly three months. In September 2013, she moved out again. In January 2014, she moved back in after 23 discovering she was pregnant. 24 25 In February 2014, she gave birth to the child. In May 2014, she moved out again. (973)406-2250]operations@escribersnet|www_escribers.net In December of 2014, she moved back in. As to this last point, the Petitioner testified 7 that "we started living together again around Christmas, like December." Later the Court asked him, "Did she move back into the Circle Drive house in December of 2014." He answered "yes". We find that during the last six months of 2013, Orozco ived in the house in July, August, and a portion of September. During a portion of the six-month period, 1 2 3 4 5 6 7 8 9 10 she was a member of the Petitioner's household. 11 We find that during the last six months of 2014, 12 Orozco lived in the house in December. During a portion 13 of the six-month period she was member of the Petitioner's 14 household. 15 16 17 Because Orozco was a member of the Petitioner's household for a portion of each six-month period, the six-month requirement of section 7703(b)(3) is not met for 18 either 2013 or 2014) 4 see Brown v. Commissioner, T.C. 19 Memo. 1997-520 v(holding that although the taxpayer's 20 wife moved out in September, she was a member of the 21 22 household during July and Augus . The Petitioner is considered married for each 23 tax year. He therefore does not qualify for head-of- 24 household status. 25 3. Standard Deduction (973)406-2250|operations@escribers.net|www.escribers.net Section 63(b) provides that a taxpayer who does 8 not itemize deductions is entitled to subtract the standard deduction in calculating taxable income. However, section 63(c) (6) (A) provides that no standard deducticn is allowed in the case of "a married individual filing a separate return where either spouse itemizes deducticns." Because the Petitioner is considered married to Orozco and because Orozco claimed itemized deductions on her 2013 and 2014 returns, the Petitioner is not 1 2 3 4 5 6 7 8 9 10 entitled to claim the standard deduction. 11 12 4. Child Care Credit A taxpayer is permitted to claim a child care 13 credit only if (1) the taxpayer is married at the close of 14 15 16 17 18 the tax year and (2) the taxpayer and his spouse file a joint return for the tax year. Section 21(a), 21(e) (2). The Petitioner was married at the close of each of the 2013 and 2014 tax yearsp3however, he did not file a joint return with Orozco for édeh year. Therefore, he is not 19 entitled to the child care credit. 20 21 22 5. Accuracy-Related Penalty Section 6662(a) imposes a penalty equal to 20 percent of a portion of any underpayment for a year if 23 that portion is attributable either to "[degligence or 24 disregard of rules or regulations" or a "substantial 25 understatement". However, no penalty is imposed with Cribers (973)406-2250|operations@escribers.netlwww.escribers.net 9 1 2 3 4 5 6 7 8 9 respect to any portion of an underpayment if it is shown that there was a reasonable cause for such portion and that the taxpayer acted in good faith with respect to such portion. Section 6664(c)(1). The Respondent has the burden of producing evidence that the penalty under section 6662 is applicable to a portion of the underpayment. However, the Petitioner has the burden of persuasion that there was reasonable cause and good faith with respect to the portion of the underpayment otherwise 10 subject to penalty. 11 12 The computations in the notice of deficiency show that the amounts of the underpayments for 2013 and 13 2014 were equal to the deficiency amounts for each year. 14 The def:.ciency amounts were $5,214 for 2013 and $6,609 for 15 2014. Furthermore, there were substantial understatements 16 for each year in the same amounts. Therefore, the 17 Petitioner. liable for a penalty under section 6662 equal 18 19 20 to 20 percent of these amounts, unless he can show that the underpayments were due to reasonable cause. The underpayment for each year resulted from the 21 Petitioner claiming that he was entitled to head-of- 22 household status, the standard deduction, and the child 23 care credit. As we hold, the Petitioner was entitled to 24 none of these tax benefits because he was married at the 25 close of each tax year. Therefore, in determining whether (973)406-2250|operations@escribersnet|wwwascribers.net he had reasonable cause for the way he prepared his returns, we must determine whether he had reasonable cause for reporting the tax benefits under the assumption that 10 he was unmarried. ircumstance that may indicate reasonable cause ir.cludes an honest misunderstanding of fact or law that is reasonable in light of all of the facts and circumstances. Section 1.6664-4(b) (1), Income Tax Regs. The Petitioner was considered married during 2013 and 1 2 3 4 5 6 7 8 9 10 2014, because he did not meet the six-month test, which 11 12 requires that "during the last six months of the taxable year, such individual's spouse is not a member of such 13 household." Orozco's absence from the house during 14 portions of the last six months of 2013 and 2014 resulted 15 in uncertainty as to whether she was a member of the 16 household during the six-month periods. 17 18 19 20 The Petitioner had an honest misunderstanding as to whether he was considered unmarried for the years 2013 and 2014. He had reasonable cause for each year's underpayment, and he is not liable for the section 6662 21 penalties. 22 23 6. Conclusion A decision will be entered that there is a 24 deficiency of $5,214 for 2013, a deficiency of $6,609 for 25 2014, no section 6662 penalty liability for 2013, and no BElBE (973) 406-2250 l operations@escribers.net ] www.escribers.net section 6662 penalty liability for 2014. 11 This concludes the bench opinion. (Whereupon, at 9:46 a.m., the above-entitled matter was concluded.) . - 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 73)406-2250loperationseescribersmet]www.escribers.net