t c summary opinion united_states tax_court dawnee cochran petitioner v commissioner of internal revenue respondent docket no 22015-08s filed date dawnee cochran pro_se g roger markley for respondent dean special_trial_judge this case was heard pursuant to the provisions of sec_7463 of the internal_revenue_code in effect when the petition was filed pursuant to sec_7463 the decision to be entered is not reviewable by any other court and this opinion shall not be treated as precedent for any other case unless otherwise indicated subsequent section references are to the internal_revenue_code code in effect for the year in issue and all rule references are to the tax_court rules_of_practice and procedure for respondent determined a deficiency of dollar_figure in petitioner’s federal_income_tax the issues for decision are whether petitioner is entitled to dependency_exemption deductions for her niece and nephew is entitled to head_of_household filing_status and is entitled to an earned_income_tax_credit background some of the facts have been stipulated and are so found the stipulation of facts and the attached exhibits are incorporated herein by reference when petitioner filed her petition she resided in illinois petitioner electronically filed her federal_income_tax return for she reported income of dollar_figure on form_1040 u s individual_income_tax_return applied head_of_household tax_rates and claimed two dependency_exemption deductions one for her niece and one for her nephew and the earned_income_tax_credit petitioner testified that in she assisted with the support of her niece and nephew because their mother was going through a difficult financial situation respondent issued to petitioner a notice_of_deficiency disallowing petitioner’s claimed dependency_exemption deductions for her niece and nephew and the earned_income_credit and changing petitioner’s filing_status from head_of_household to single i burden_of_proof discussion generally the commissioner’s determinations are presumed correct and the taxpayer bears the burden of proving that those determinations are erroneous rule a see 503_us_79 290_us_111 deductions and credits are a matter of legislative grace and the taxpayer bears the burden of proving that he or she is entitled to any deduction or credit claimed rule a 308_us_488 292_us_435 likewise the taxpayer is obliged to demonstrate entitlement to an advantageous filing_status such as head_of_household smith v commissioner tcmemo_2008_229 ii dependency_exemption deduction a taxpayer is entitled to claim a dependency_exemption deduction under sec_151 only if the claimed dependent is a 1petitioner has not claimed or shown that she meets the requirements under sec_7491 to shift the burden_of_proof to respondent as to any factual issue relating to her liability for tax qualifying_child or a qualifying_relative as defined under sec_152 and d sec_152 a qualifying_child includes the taxpayer’s child brother sister stepbrother or stepsister or a descendant of any of them see sec_152 and in addition sec_152 provides that an individual is a qualifying_child of the taxpayer only if the child had the same principal_place_of_abode as the taxpayer for more than one- half of the taxable_year the child meets specified age requirements and the child did not provide over one-half of his or her own support for the taxable_year petitioner contends that the children she claimed as dependents are her niece and nephew and that they both lived with her from april through date but she presented no credible_evidence that she was related to the children or that the children lived with her during therefore the court finds that these children are not petitioner’s qualifying children for see irions v commissioner tcmemo_2009_ 2petitioner did not provide the court with copies of the children’s birth certificates a copy of her rental agreement or any credible_evidence that she and the children shared the same principal_place_of_abode 3petitioner also failed to demonstrate that these children were her qualifying relatives for purposes of sec_152 ii head_of_household filing_status sec_1 provides a special tax_rate for an individual who qualifies as a head_of_household as relevant herein sec_2 provides that an unmarried individual shall be considered a head of a household if and only if that individual maintains as his home a household which constitutes for more than one-half of such taxable_year the principal_place_of_abode of a qualifying_child of the individual as defined in sec_152 sec_2 or any other person who is a dependent of the taxpayer if the taxpayer is entitled to a deduction for the taxable_year for such person under sec_151 sec_2 petitioner does not satisfy the requirements of sec_2 because she has not shown that the two children she claimed as dependents for are her qualifying children as defined in sec_152 accordingly petitioner is not entitled to head_of_household filing_status for respondent’s determination is sustained iii earned_income_tax_credit sec_32 allows an eligible_individual an earned_income_tax_credit against that individual’s income_tax_liability the amount of the credit for a taxpayer with qualifying children is determined according to the number of the taxpayer’s qualifying children sec_32 under sec_32 a qualifying_child is defined the same as a qualifying_child of the taxpayer as defined in sec_152 she has not shown that the children she claimed as dependents are her qualifying children pursuant to sec_152 therefore petitioner is not entitled to claim these children as qualifying children for purposes of the earned_income_tax_credit under sec_32 petitioner’s adjusted_gross_income for exceeded dollar_figure accordingly she is also ineligible to claim an earned_income_credit under sec_32 as an individual without a qualifying_child see revproc_2006_53 sec_3 2006_2_cb_996 announcing the specific amount for to reflect the foregoing decision will be entered for respondent


department of the treasury internal_revenue_service washington d c date number release date cc ita tl-n-2407-00 uilc internal_revenue_service national_office field_service_advice memorandum for district_counsel kansas-missouri attn donald l wells special litigation assistant cc msr ksm stl from associate chief_counsel income_tax accounting cc ita subject tax reduction as a business_purpose this field_service_advice responds to your memorandum of date field_service_advice is not binding on examination or appeals and is not a final case determination this document is not to be cited as precedent disclosure statement field_service_advice is chief_counsel_advice and is open to public inspection pursuant to the provisions of sec_6110 the provisions of sec_6110 require the service to remove taxpayer identifying information and provide the taxpayer with notice of intention to disclose before it is made available for public inspection sec_6110 and i sec_6110 also authorizes the service to delete information from field_service_advice that is protected from disclosure under u s c sec_552 b and c before the document is provided to the taxpayer with notice of intention to disclose only the national_office function issuing the field_service_advice is authorized to make such deletions and to make the redacted document available for public inspection accordingly the examination appeals or counsel recipient of this document may not provide a copy of this unredacted document to the taxpayer or their representative the recipient of this document may share this unredacted document only with those persons whose official tax_administration duties with respect to the case and the issues discussed in the document require inspection or disclosure of the field_service_advice legend corp x corp z tl-n-2407-00 year issue whether reduction of taxes can be a valid business_purpose for engaging in a transaction conclusion where a transaction objectively affects a taxpayer’s net economic position legal relations or non-tax business interests it will not be disregarded merely because it was motivated by tax considerations the present transaction however should be disregarded for tax purposes facts shortly after acquiring corp z corp x made a series of loans to corp z followed immediately by dividend distributions from corp z to corp x these transactions were reflected by journal entries in a cash management account utilized by all the corporations corp z claims it engaged in this transaction to reduce taxes in year corp z did not make principal repayments on the loans interest was paid sporadically if at all the amount lent to corp z by corp x was at least three times what a commercial bank would have lent the revenue_agent contacted revenue authorities from three different states all three authorities concluded the transactions would be impermissible under that state’s laws and would violate state law law and analysis a transaction may be valid even though it is tax motivated this accords with the case law in kraft foods co v commissioner f 2d 2d cir the court determined that interest payments made to a parent_corporation were deductible kraft foods paid its parent_corporation a substantial dividend by using debentures the purpose underlying the transaction was for the taxpayer to obtain a tax_benefit from the interest payments the court discussed that transactions between affiliates should be closely scrutinized and sham transactions should be disregarded however the court found that the transaction was a genuine transaction affecting legal relations the parties intended and created an indebtedness enforceable under state law the court recognized that the structure of the tax law deliberately recognizes tl-n-2407-00 tax-conscious motivations and seeks both to encourage some transactions and to discourage others tax minimization is a proper objective of corporate management the court concluded that transactions even though real can be disregarded if they are a sham or masquerade or if they take place between taxable entities having no real existence the court noted that the entities were real and the transactions created actual indebtedness and were not a device to convert equity into debt in 113_tc_254 the court concluded that interest claimed on corporate owned life_insurance policies was not deductible the court determined that the overall transaction did not have economic_substance economic_substance requires a change in the economic position of the taxpayer other than tax effects the transaction at issue produced negative cash_flow and earnings except for the projected tax benefits where the only function of the plan is to produce tax deductions to reduce a taxpayer’s income_tax liabilities the transaction lacks economic_substance and should not be recognized for tax purposes in 157_f3d_231 3d cir cert_denied 526_us_1017 the court analyzed a series of transactions designed to artificially create capital_gains_and_losses the tax_court concluded that acm could not deduct its claimed losses because the losses were not economically inherent in the transaction but were artificially created by machinations whose only purpose and effect was to give rise to desired tax consequences acm tcmemo_1997_115 the third circuit agreed recognizing that it must be determined whether a transaction has the economic_substance that its form represents each step of the transaction from the commencement to the consummation is relevant in reaching this determination the third circuit in footnote summarized the law about when a transaction will be recognized for tax purposes the court stated while it is clear that a transaction such as acm’s that has neither objective non-tax economic effects nor subjective non-tax purposes constitutes an economic sham whose tax consequences must be disregarded and equally clear that a transaction that has both objective non-tax economic significance and subjective non-tax purposes constitutes an economically substantive transaction whose tax consequences must be respected it is also well established that where a transaction objectively affects the taxpayer’s net economic position legal relations or non-tax business interests it will not be disregarded merely because it was motivated by tax considerations tl-n-2407-00 acm partnership f 3d pincite the courts in kraft foods in winn-dixie and in acm partnership noted that the starting point for determining whether the form of a particular transaction would be recognized for tax purposes is the supreme court’s opinion in 293_us_465 the supreme court stated the legal right of a taxpayer to decrease the amount of what would otherwise be his taxes or altogether avoid them by means which the law permits cannot be doubted but the question for determination is whether what was done apart from the tax motive was the thing which the statute intended gregory u s pincite in kraft foods the court determined that the loans would be recognized because there was a change in economic condition in winn-dixie the transaction was not recognized for federal_income_tax purposes because it would have caused a negative change in economic condition absent tax benefits so the transaction lacked economic_substance apart from the anticipated tax benefits in acm partnership the loss was not recognized because the transactions did not have objective non-tax economic effects or subjective non-tax purposes in the present case the transaction did not objectively affect the corporations’ net economic position legal relations or non-tax business_interest furthermore the indebtedness would not have been enforceable under state law the transaction should be disregarded for tax purposes please call if you have any further questions by clifford m harbourt senior technician reviewer branch one income_tax and accounting heather c maloy


internal_revenue_service department of the treasury number release date index number washington dc person to contact telephone number refer reply to cc psi 4-plr-161419-01 date september re legend year year date date date date date date grantor grantor’s spouse trustee trust son son’s spouse daughter daughter’ spouse dollar_figurex year year year dear this is in response to your letter dated date requesting an extension of time under sec_301_9100-3 of the procedure and administration regulations to make an allocation of the generation-skipping_transfer gst tax exemption this letter responds to your request the facts and representations submitted are summarized as follows on date grantor and grantor’s spouse the grantors established an irrevocable_trust trust for the benefit of grantors’ children and their spouses and their descendants the asset transferred to trust was an insurance_policy insuring the joint lives of grantor and grantor’s spouse plr-161419-01 article one paragraph b provides that until the death of the survivor of the grantors the trustee may use and apply each trust year so much of the principal but not income of the trust estate as is necessary to pay any premiums due on any life_insurance policies comprising a part of the trust principal paragraph b further provides that trustee may also during any trust year pay to or use and apply for the benefit of grantors’ children and their respective spouses so much of the net_income and principal of the trust estate in equal or unequal amounts at any time as the trustee in the trustee’s discretion may deem necessary or appropriate for their respective maintenance health education and support taking into account however any income or principal otherwise reasonably available to them from other sources known to the trustee distributions made during grantors’ lives to son and son’s spouse and daughter and daughter’s spouse should be as closely equivalent as possible any trust income not used during any trust year is to be accumulated and added to principal article four paragraph a provides generally that with respect to each transfer prior to the death of the survivor of the grantors to the trust each of grantors’ then living children and their then respective spouses and their respective then living descendants on the date of any transfer have the right for a period of days following receipt of notice of the transfer to demand immediate distribution to himself or herself of a pro_rata portion of the transfer to the extent that the withdrawal right is not exercised before the expiration of the 30-day period the withdrawal right will lapse but only to the extent of the greater of the amounts specified in sec_2514 and of the internal_revenue_code reduced by the amounts of any lapses as to that beneficiary in previous calendar years article six paragraph a provides that upon the death of the survivor of the grantors the trustee will collect the insurance proceeds and administer and distribute the proceeds to trusts for the benefit of grantor’s descendants article six paragraph d provides that upon the termination of the trust any separate trust estate will terminate and upon such termination the balance of the trust estate will be distributed free of trust to the living person for whom the trust was established in year and year grantor made gifts of dollar_figurex to trust grantor and grantor’s spouse each filed form sec_709 united_states gift and generation-skipping_transfer_tax return on date under extension on the returns the parties consented to treat grantor’s gifts as having been made one-half by each under sec_2513 a cpa prepared the returns however with respect to the returns filed for both year and year the cpa erred in allocating grantor’s and grantor’s spouse’s gst tax exemptions consequently insufficient exemption was allocated to trust to maintain a zero inclusion_ratio under sec_2642 in updating their estate plan in year grantors’ attorney received copies of grantor’s year and year form sec_709 the attorney informed grantors that insufficient gst tax exemption had been allocated to trust such that the trust’s inclusion_ratio was greater than zero as noted above under the terms of trust with respect to gift transfers by grantor or grantor’s spouse during their joint lifetimes to trust their two children and each of their children’s spouses and each of the children’s descendant’s have a discretionary withdrawal right exercisable in writing by each delivered to the trustee of trust within days of such plr-161419-01 transfer you represent that during year and year there were six individuals in their capacity as beneficiaries who were eligible and had a discretionary right of withdrawal none of the six individuals exercised their right of withdrawal during year or year or any time thereafter sec_2601 imposes a tax on every generation-skipping_transfer gst a gst is defined under sec_2611 as a taxable_distribution a taxable_termination and a direct_skip sec_2602 provides that the amount of the tax is the taxable_amount multiplied by the applicable_rate sec_2641 defines applicable_rate as the product of the maximum_federal_estate_tax_rate and the inclusion_ratio with respect to the transfer under sec_2642 the inclusion_ratio with any property transferred in a generation- skipping transfer is generally defined as the excess of over the applicable_fraction the applicable_fraction as defined in sec_2642 is a fraction the numerator of which is the amount of gst_exemption under sec_2631 allocated to the trust or to property transferred in a direct_skip and the denominator is the value of the property transferred to the trust or involved in the direct_skip sec_2631 provides that for purposes of determining the inclusion_ratio every individual shall be allowed a gst_exemption of dollar_figure adjusted for inflation under sec_2631 which may be allocated by such individual or his executor to any property with respect to which such individual is the transferor sec_2631 provides that any allocation under sec_2631 once made shall be irrevocable sec_2632 provides that any allocation by an individual of his or her gst_exemption under sec_2631 may be made at any time on or before the date prescribed for filing the estate_tax_return for such individual’s estate determined with regard to extensions regardless of whether such a return is required to be filed sec_26_2632-1 of the generation-skipping_transfer_tax regulations provides that an allocation of gst_exemption to property transferred during the transferor’s lifetime other than in a direct_skip is made on form_709 sec_2652 provides that if under sec_2513 one-half of a gift is treated as made by the individual and one-half if treated as being made by the individual’s spouse then such gift shall be so treated for gst tax purposes sec_2642 provides that except as provided in sec_2642 if the allocation of the gst_exemption to any transfers of property is made on a gift_tax_return filed on or before the date prescribed by sec_6075 for such transfer or is deemed to be made under sec_2632 or c the value of such property for purposes of sec_2642 shall be its value as finally determined for purposes of chapter within the meaning of sec_2001 or in the case of an allocation deemed to have been made at the close of an estate_tax_inclusion_period its value at the time of the close of the estate_tax_inclusion_period and such allocation shall be effective on and after the date of such transfer or in the case of an allocation deemed to have been made plr-161419-01 at the close of an estate_tax_inclusion_period on and after the close of such estate_tax_inclusion_period sec_2642 provides generally that the secretary shall by regulation prescribe such circumstances and procedures under which extensions of time will be granted to make an allocation of gst_exemption described in sec_2642 or and an election under sec_2632 or c such regulations shall include procedures for requesting comparable relief with respect to transfers made before the date of the enactment of this paragraph sec_2642 provides that in determining whether to grant relief under this paragraph the secretary shall take into account all relevant circumstances including evidence of intent contained in the trust instrument or instrument of transfer and such other factors as the secretary deems relevant for purposes of determining whether to grant relief under this paragraph the time for making the allocation or election shall be treated as if not expressly prescribed by statute sec_301_9100-1 provides that the commissioner has discretion to grant a reasonable extension of time under the rules set forth in sec_301_9100-2 and sec_301_9100-3 to make a regulatory election or a statutory election but not more that months except in the case of a taxpayer who is abroad under all subtitles of the internal_revenue_code except subtitles e g h and i sec_301_9100-3 provides standards used to determine whether to grant an extension of time to make an election whose due_date is prescribed by a regulation and not expressly provided by statute under sec_301_9100-1 a regulatory election includes an election whose due_date is prescribed by a notice published in the internal_revenue_bulletin notice_2001_50 2001_34_irb_189 provides that taxpayers may seek an extension of time to make an allocation described in sec_2642 or b or an election described in sec_2632 or c under the provisions of sec_301_9100-3 in accordance with sec_2642 and notice_2001_50 taxpayers may seek an extension of time to make an allocation described in sec_2642 or b or an election described in sec_2632 or c under the provisions of sec_301_9100-3 requests for relief under sec_301_9100-3 will be granted when the taxpayer provides the evidence to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government sec_301_9100-3 provides that a taxpayer is deemed to have acted reasonably and in good_faith if the taxpayer reasonably relied on a qualified_tax professional including a tax professional employed by the taxpayer and the tax professional failed to make or advise the taxpayer to make the election based on the facts submitted and the representations made we conclude that the requirements of sec_301_9100-3 have been satisfied therefore grantor and grantor’s spouse are granted an extension of time of days from the date of this letter to make allocations of their available gst_exemption with respect to the transfers to trust on date and date the plr-161419-01 allocations will be effective as of date and date the dates of the transfers to trust in year and year and the gift_tax value of the transfers to trust will be used in determining the amount of gst_exemption to be allocated to trust the rulings contained in this letter are based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination except as specifically ruled herein we express or imply no opinion on the federal tax consequences of the transaction under the cited provisions or under any other provisions of the code this rulings are directed only to the taxpayers requesting it sec_6110 provides that it may not be used or cited as precedent this election should be made on a supplemental form_709 united_states gift and generation-skipping_transfer_tax return and filed with the internal_revenue_service center cincinnati ohio a copy of this letter should be attached to the supplemental form_709 a copy is enclosed for this purpose sincerely heather c maloy associate chief_counsel passthroughs and special industries enclosures copy for sec_6110 purposes copy of this letter cc


t c summary opinion united_states tax_court humberto m betancourt petitioner v commissioner of internal revenue respondent docket no 1154-03s filed date humberto m betancourt pro_se ric d hulshoff for respondent panuthos chief special_trial_judge this case was heard pursuant to the provisions of sec_7463 of the internal_revenue_code in effect at the time the petition was filed the decision to be entered is not reviewable by any other court and this opinion should not be cited as authority unless otherwise indicated subsequent section references are to the internal_revenue_code in effect for the year in issue respondent determined a deficiency in federal_income_tax of dollar_figure for the taxable_year the issues for decision are whether petitioner is entitled to head-of-household filing_status for whether petitioner is entitled to dependency_exemption deductions for erica benicna maceda and ivan maceda rodriguez for whether petitioner is entitled to an additional_child_tax_credit of dollar_figure for and whether petitioner is entitled to an earned_income_credit of dollar_figure for background some of the facts have been stipulated and the stipulated facts are incorporated in our findings by this reference at the time of filing his petition petitioner resided in los angeles california during the year in issue petitioner was a hardwood flooring installer and cristina rodriguez ms rodriguez was a cook ms rodriguez received wages of approximately dollar_figure in petitioner and ms rodriguez have three children erica benicna maceda erica born date tanya born and ivan maceda rodriguez ivan born date petitioner and ms rodriguez were not married in but they shared a checking account during the year also in they owned a duplex with two addresses zamora street and zamora street the duplex consisted of side-by-side apartments with separate entrances the apartment pincite zamora street has one bedroom and the apartment pincite zamora street has two erica tanya and ivan had keys to both apartments and ate meals sometimes in one or the other apartment petitioner filed a timely federal_income_tax return for the taxable_year the return reflected an address of zamora street and reported total income of dollar_figure petitioner filed as a head_of_household and claimed dependency_exemption deductions for erica and ivan but not tanya petitioner also claimed an additional_child_tax_credit of dollar_figure and an earned_income_credit of dollar_figure with erica and ivan as qualifying children respondent issued petitioner a notice_of_deficiency dated date discussion sec_7491 provides that in a court_proceeding the burden_of_proof with respect to any factual issue shifts to the the notice_of_deficiency included a rate adjustment credit of dollar_figure which petitioner had not claimed in hi sec_2001 tax_return the economic_growth_and_tax_relief_reconciliation_act_of_2001 publaw_107_16 115_stat_38 created a new regular income_tax bracket of percent for taxable years beginning after date see sec_1 congress decided to implement the 10-percent rate bracket for via a rate reduction credit for that taxable_year see sec_1 h conf rept pincite the maximum amount of the rate reduction credit depends upon a taxpayer’s filing_status for and thus it is computational see sec_1 commissioner under certain prescribed conditions we conclude that the burden_of_proof remains with petitioner since he has not met the criteria of sec_7491 and b indeed we found petitioner’s testimony was at times inconsistent with both ms rodriguez’s testimony and documents made part of this record head-of-household filing_status petitioner filed as head_of_household for in general sec_2 provides that a taxpayer shall be considered a head of a household if and only if such taxpayer is not married at the close of his or her taxable_year is not a surviving_spouse and maintains as his or her home a household which constitutes for more than one-half of such taxable_year the principal_place_of_abode as a member of such household of a son or daughter of the taxpayer a taxpayer shall be considered as maintaining a household only if over half of the cost of maintaining the household during the taxable_year is furnished by such taxpayer sec_2 during the year in issue petitioner was not married to ms rodriguez and was not a surviving_spouse with respect to maintaining a household petitioner contends that zamora street was a household that constituted the principal_place_of_abode for erica ivan and petitioner during petitioner further contends that the other address of the duplex--4219 zamora street--was a household solely for ms rodriguez and tanya during the taxable_year the record however does not support petitioner’s contentions the extent of a household is not determined solely by physical boundaries instead we must look to all of the facts in any particular case estate of fleming v commissioner tcmemo_1974_137 tanya had unrestricted access to petitioner’s household and had meals with erica and ivan during moreover ms rodriguez testified that she and the children lived at the same address that petitioner claimed as his household on the basis of the record we find that petitioner’s household consisted of ms rodriguez the children and petitioner whether it be pincite zamora street or the entire duplex consequently petitioner did not maintain such household under sec_2 because he did not establish that he furnished over half the cost of maintaining it for petitioner reported total income of dollar_figure whereas ms rodriguez had wages of approximately dollar_figure accordingly we conclude that petitioner is not entitled to head-of-household filing_status and we sustain respondent’s determination on this issue dependency_exemption deductions a taxpayer may be entitled to a deduction of the exemption_amount for each dependent sec_151 c the term dependent includes a son of the taxpayer over half of whose support for the calendar_year in which the taxable_year of the taxpayer begins was received from the taxpayer sec_152 given the limited information as to the amount_paid for support of the children the existence of the joint checking account and ms rodriguez’s higher income for lead us to the conclusion that petitioner did not provide over half of the support for erica and ivan accordingly petitioner is not entitled to dependency_exemption deductions for erica and ivan for and we sustain respondent on this issue additional_child_tax_credit sec_24 provides for a credit against the tax for the taxable_year with respect to each qualifying_child of the taxpayer the term qualifying_child means any individual if three tests are satisfied sec_24 in the present case the only relevant test is whether the taxpayer is allowed a deduction under sec_151 with respect to such individual for the taxable_year sec_24 we have concluded however that petitioner is not entitled to dependency_exemption deductions for erica and ivan for accordingly they are not qualifying children and petitioner is not entitled to the additional_child_tax_credit of dollar_figure for we sustain respondent’s determination on this issue earned_income_credit sec_32 provides for an earned_income_credit in the case of an eligible_individual sec_32 in pertinent part defines an eligible_individual as any individual who has a qualifying_child for the taxable_year a qualifying_child is one who satisfies a relationship_test a residency test and an age_test sec_32 erica and ivan satisfy all three tests and they are qualifying children with respect to petitioner however they are also qualifying children with respect to ms rodriguez under such circumstances for taxable years beginning on or before date sec_32 provides c or more eligible individuals --if or more individuals would be treated as eligible individuals with respect to the same qualifying_child for taxable years beginning the same calendar_year only the individual with the highest modified_adjusted_gross_income for such taxable years shall be treated as an eligible_individual with respect to such qualifying_child sec_32 defines the term modified adjusted gro sec_2 petitioner could also be an eligible_individual even if we were to find that he did not have any qualifying children see sec_32 in such a situation however petitioner would still not be entitled to the earned_income_credit for because his total income of dollar_figure exceeded the completed phaseout amount of dollar_figure see revproc_2001_13 sec_3 2001_1_cb_337 income to be the taxpayer’s adjusted_gross_income with certain amounts disregarded and certain amounts included in the present case we conclude that petitioner’s modified_adjusted_gross_income would not be higher than that of ms rodriguez given that her wage income alone was greater than petitioner’s total income for accordingly we sustain respondent’s determination on this issue reviewed and adopted as the report of the small_tax_case division to reflect the foregoing decision will be entered for respondent


t c memo united_states tax_court john d mcclure jr petitioner v commissioner of internal revenue respondent docket no 9406-07l filed date john d mcclure jr pro_se david e whitcomb for respondent memorandum findings_of_fact and opinion cohen judge this case was commenced in response to a notice_of_determination concerning collection action s under sec_6320 and or with respect to unpaid trust fund recovery penalties under sec_6672 for periods ended date date date date and date unless otherwise indicated all section references are to the internal_revenue_code findings_of_fact some of the facts have been stipulated and the stipulated facts are incorporated in our findings by this reference petitioner resided in texas at the time that he filed the petition on date the internal_revenue_service irs sent by certified mail a letter trust funds recovery penalty letter proposing to assess against petitioner a_trust fund recovery penalty attributable to unpaid liabilities from form_941 employer’s quarterly federal tax_return incurred by netco electrical services inc for the final quarter of and all four quarters of on date petitioner contested his liability for the proposed trust fund recovery penalty on the form_2751 proposed assessment of trust fund recovery penalty included with the letter petitioner’s contest was unsuccessful and on date the irs assessed a liability pursuant to sec_6672 for the third quarter of on date the irs assessed a liability pursuant to sec_6672 for the fourth quarter of and on date the irs assessed liabilities for the first second and fourth quarters of on date the irs sent to petitioner a letter notice_of_federal_tax_lien filing and your right to a hearing under sec_6320 cdp_notice on or about date petitioner sent to the irs a form request for a collection_due_process_hearing the notice_of_determination that is the basis of this proceeding was sent to petitioner on date in sustaining the notice of lien the notice_of_determination set forth the verification of legal and procedural requirements and discussed the relevant issues petitioner presented in part the notice stated pursuant to sec_6330 a taxpayer can raise a challenge to the existence or amount of the underlying tax_liability if the person did not receive any statutory_notice_of_deficiency for the tax_liability or did not otherwise have an opportunity to dispute the tax_liability the taxpayer bill of right sec_2 tborii added a preliminary notice requirement regarding trust fund recovery penalty assessments made assessed after date pursuant to sec_6672 the taxpayer must be notified in writing before an assessment is made the notice of the proposed assessment must precede the notice_and_demand for payment by at least days in this case letter was mailed by certified mail to the taxpayer’s last_known_address on date the taxpayer received the notice and submitted an inadequate appeal the taxpayer was afforded an opportunity to perfect his protest but failed to do so by the deadline of date the notice_and_demand for payment was sent on date more than days after the issuance of letter therefore the required pre-assessment procedures were followed appeals has determined that the taxpayer is precluded from challenging the existence or amount of the underlying tax_liability within the context of this due process hearing pursuant to sec_6330 however the taxpayer also filed form_843 claim_for_refund and request for abatement which was denied by technical services advisory on date and assigned to appeals in conjunction with the collection_due_process_hearing the taxpayer’s issues concerning the validity of the underlying liability were addressed within the separate claim proceeding appeals sustained the claim disallowance after determining that the taxpayer was a responsible_person who willfully failed to pay the trust_fund_taxes as defined by sec_6672 and sec_6671 a statutory notice of claim disallowance was mailed to the taxpayer within the claim proceeding the notice_of_determination also summarized petitioner’s claim that he could not pay the trust fund recovery penalty and petitioner’s refusal to provide information concerning his spouse’s assets and stated consequently appeals is unable to accurately determine the taxpayer’s ability to pay and cannot recommend that the taxpayer’s account be declared currently not collectible at this time the taxpayer did not propose an installment_agreement or offer_in_compromise as a collection alternative in the petition petitioner asserts that these are not my taxes they are taxes owed by c snider who owns netco electrical services i have given proof to the irs of the ownership of netco i had no ownership of netco electrical services i did not collect monies write checks or performed any daily activities of netco i was hired as a consultant to down size netco and try to increase share of market opinion the underlying liabilities in this case were assessed under sec_6672 which imposes penalties for failure to collect account for and pay over income and employment_taxes of employees these penalties are commonly referred to as trust fund recovery penalties as set forth in sec_6671 such penalties are assessed and collected in the same manner as taxes against a person who is an officer_or_employee of a corporation who as such officer employee or member is under a duty to perform the duties referred to in sec_6672 such persons are referred to as responsible persons and the term may be broadly applied see generally 195_f3d_229 5th cir 988_f2d_1449 5th cir any person who qualifies as a responsible_person under the statute is liable for the penalty vis-a-vis the government a right of contribution against other responsible persons exists but must be claimed separate and apart from proceedings to collect the penalty brought by the united_states sec_6672 in his trial memorandum and at trial petitioner continued to maintain that he was not responsible for the trust fund recovery penalties assessed against him and he argued that the irs should pursue the person or persons in fact responsible he did not dispute that he had pursued his arguments previously and unsuccessfully respondent’s position is that the prior opportunity to dispute the underlying liabilities precludes our consideration of petitioner’s arguments sec_6321 creates a lien in favor of the united_states on all property and rights to property belonging to a person liable for taxes when payment has been demanded and neglected the lien arises by operation of law when the irs assesses the amount of unpaid tax sec_6322 the irs files a notice_of_federal_tax_lien to preserve priority and put other creditors on notice see sec_6323 sec_6320 provides that the secretary shall furnish the person described in sec_6321 with written notice of the filing of a lien under sec_6323 this notice must be provided not more than business days after the day the notice of lien is filed and must advise the taxpayer of the opportunity for administrative review in the form of a hearing sec_6320 petitioner has not shown or asserted any omission with respect to the filing or notice of the lien and none is disclosed in the record sec_6320 further provides that the taxpayer may request a hearing within the 30-day period beginning on the day after the 5-day period the hearing generally shall be conducted consistent with the procedures set forth in sec_6330 d and e sec_6320 a taxpayer may raise any relevant issue at the hearing including challenges to the appropriateness of collection actions and may make offers of collection alternatives which may include the posting of a bond the substitution of other assets an installment_agreement or an offer-in-compromise sec_6330 at the hearing a taxpayer may challenge the existence and amount of the underlying tax_liability only if he or she received no notice_of_deficiency or did not otherwise have an opportunity to dispute such tax_liability sec_6330 our jurisdiction to review determinations under sec_6330 with respect to trust fund recovery penalties is relatively recent see ginsberg v commissioner t c ___ thus we have not explored the meaning of a prior opportunity to dispute in this context however sec_301_6320-1 q a-e2 proced admin regs addresses the meaning of that term as follows q-e2 when is a taxpayer entitled to challenge the existence or amount of the tax_liability specified in the cdp_notice a-e2 a taxpayer is entitled to challenge the existence or amount of the underlying liability for any_tax period specified on the cdp_notice if the taxpayer did not receive a statutory_notice_of_deficiency for such liability or did not otherwise have an opportunity to dispute such liability receipt of a statutory_notice_of_deficiency for this purpose means receipt in time to petition the tax_court for a redetermination of the deficiency determined in the notice_of_deficiency an opportunity to dispute the underlying liability includes a prior opportunity for a conference with appeals that was offered either before or after the assessment of the liability the quoted regulation has been explained and applied in circumstances similar to those in this case see 253_fsupp2d_258 d conn petitioner contested the liability in response to the letter although his contest was unsuccessful apparently he failed to follow up with appeals after being afforded the opportunity in 128_tc_48 we discussed at length and upheld the validity of sec_301 e q a-e2 proced admin regs concluding that a prior opportunity to dispute a liability for purposes of section c b did not require an opportunity for judicial review of the liability thus we conclude that petitioner is not entitled to dispute here his status as a responsible_person and the consequent liabilities for the underlying trust fund recovery penalties because we may not redetermine the underlying liabilities our review of the notice_of_determination is for abuse_of_discretion see eg 338_f3d_463 5th cir petitioner has not in this proceeding pursued any argument or presented any evidence that would allow us to conclude that the determination to sustain the lien was arbitrary capricious without foundation in fact or law or otherwise an abuse_of_discretion see eg 129_tc_107 therefore decision will be entered for respondent