PURSUANT TO INTERNAL REVENUE CODE
SECTION 7463(b),THIS OPINION MAY NOT
BE TREATED AS PRECEDENT FOR ANY
OTHER CASE.
T.C. Summary Opinion 2014-46
UNITED STATES TAX COURT
JASON ALAN BRUCE, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 21253-12S. Filed May 12, 2014.
Jason Alan Bruce, pro se.
Michael Hensley and Brian Beddingfield (student), for respondent.
SUMMARY OPINION
PANUTHOS, Chief Special Trial Judge: This case was heard pursuant to
the provisions of section 7463 of the Internal Revenue Code in effect when the
petition was filed. Pursuant to section 7463(b), the decision to be entered is not
reviewable by any other court, and this opinion shall not be treated as precedent
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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.
Respondent determined a $6,804 deficiency in, and an accuracy-related
penalty of $1,360.80 with respect to, petitioner’s 2010 Federal income tax. The
issues for decision are: (1) whether petitioner is entitled to the filing status of
married filing jointly, and if not, whether he is entitled to (a) dependency
exemption deductions, (b) the child tax credit, (c) the additional child tax credit,
and (d) the earned income credit (EIC), and (2) whether petitioner is liable for the
accuracy-related penalty under section 6662(a).
Background
Some of the facts have been stipulated, and we incorporate the stipulation of
facts and the attached exhibits herein by reference. Petitioner resided in California
when the petition was filed.
Petitioner and his former wife Jazsmine Bruce were married in 2008, and
they had a son who was born in 2008. Ms. Bruce also had a daughter from a
previous relationship. Petitioner has worked as a technician on an aircraft carrier
in the U.S. Navy since 1997, and he was deployed on sea duty intermittently
throughout 2010. Petitioner’s family lived in Navy housing in 2009. Petitioner,
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Ms. Bruce, and the children moved into petitioner’s mother-in-law’s house in
January 2010. During 2010 petitioner, Ms. Bruce, and the children mostly lived at
petitioner’s mother-in-law’s house but also spent time at petitioner’s mother’s
house.
In March 2010 petitioner initiated divorce proceedings. The record is
unclear as to any detail of the specific events between the time of the divorce
proceedings in March 2010 and February 2011, when the final divorce decree was
entered. Petitioner continued to live with Ms. Bruce and the children at least until
December 2010, when he moved out of his mother-in-law’s house while Ms.
Bruce remained there with the children.
Petitioner and Ms. Bruce filed a 2009 joint Federal income tax return after
their first year of marriage, claiming dependency exemption deductions for the two
children and the child tax credit, the additional child tax credit, and the EIC.
In January 2011 petitioner electronically filed a 2010 return, claiming the
status of married filing jointly. The return reflected an overpayment of $4,581. In
February 2011 petitioner and Ms. Bruce discussed the status of the tax return via
email. Ms. Bruce learned that petitioner had filed a joint tax return for 2010 and
that he intended to share the refund. Ms. Bruce did not object to the joint filing
but indicated that she would consult her mother’s friend who “does taxes” to claim
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deductions for certain school expenses. Ms. Bruce also provided her bank
information to petitioner via email after he mentioned sharing the refund.
In March 2011 Ms. Bruce filed a 2010 Federal income tax return, claiming
head of household filing status. Ms. Bruce also claimed the two minor children as
dependents. Petitioner was unaware of Ms. Bruce’s separately filed return until
the Internal Revenue Service (IRS) notified him that it had disallowed the claimed
joint return filing status. The record reflects that petitioner had a higher adjusted
gross income than Ms. Bruce in 2010.1
In a notice of deficiency dated July 11, 2012, respondent determined that
petitioner was not entitled to the filing status of married filing jointly and adjusted
his filing status to married filing separately. Respondent also disallowed the
claimed dependency exemption deductions, the child tax credit, the additional
child tax credit, and the EIC and imposed the accuracy-related penalty under
section 6662(a).
1
Petitioner reported adjusted gross income (AGI) of $36,943 for 2010, and
Ms. Bruce reported AGI of $15,020 for 2010.
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Discussion
I. Burden of Proof
In general, the Commissioner’s determination as to a taxpayer’s tax liability
is presumed correct, and the taxpayer bears the burden of proving otherwise. See
Rule 142(a); Welch v. Helvering, 290 U.S. 111, 115 (1933). In certain
circumstances, the burden of proof shifts to the Commissioner if the taxpayer
introduces credible evidence with respect to any factual issues relevant to
ascertaining the taxpayer’s tax liability. Sec. 7491(a)(1). Because petitioner has
not alleged or shown that section 7491(a) applies, the burden of proof remains on
him.
II. Joint or Separate Return
Section 6013(a) permits a husband and wife to file a joint return. Spouses
who elect to file a joint return for a tax year are required to compute their tax on
the aggregate income of both spouses, and both spouses are jointly and severally
liable for all taxes due. See sec. 6013(d)(3); Butler v. Commissioner, 114 T.C.
276, 282 (2000).
The married filing jointly status does not apply to a Federal income tax
return unless both spouses intend to make a joint return. Jones v. Commissioner,
327 F.2d 98, 101 (4th Cir. 1964), rev’g on other grounds 39 T.C. 734 (1963). The
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failure of one spouse to sign the return does not negate the intent of filing a joint
return by the nonsigning spouse. Estate of Campbell v. Commissioner, 56 T.C. 1,
12 (1971).
Where spouses file a joint return with respect to a tax year, neither spouse
may thereafter elect married filing separately status for that tax year if the time for
filing the tax return of either spouse has expired. See United States v. Guy, 978
F.2d 934 (6th Cir. 1992); Ladden v. Commissioner, 38 T.C. 530, 534 (1962);
Haigh v. Commissioner, T.C. Memo. 2009-140; sec. 1.6013-1(a)(1), Income Tax
Regs.
Even if Ms. Bruce had tacitly agreed to the filing of the 2010 joint return, it
is undisputed that Ms. Bruce subsequently filed a separate tax return before the
time for either spouse to file a return had expired. See sec. 1.6013-1(a)(1), Income
Tax Regs. Generally, the time for filing a tax return is the 15th day of April
following the close of the calendar year. Sec. 6072(a). Ms. Bruce timely filed a
separate return in March 2011. Thus, we sustain respondent’s adjustment of
petitioner’s filing status to married filing separately.
III. Dependency Exemption Deductions
Section 151(c) allows as a deduction an exemption for each dependent of a
taxpayer in computing taxable income. Section 152(a) provides that a dependent
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means a “qualifying child” or a “qualifying relative”. Section 152(c) provides the
requirements for an individual to be a “qualifying child” of a taxpayer.
Sec. 152(c)(1)(A)-(E). Section 152(c)(1) defines a “qualifying child” as an
individual: (1) who bears a designated relationship to the taxpayer; (2) who shares
the same principal place of abode as the taxpayer; (3) who meets specific age
requirements; (4) who has not provided over one-half of his or her own support;
and (5) who has not filed a joint return with the individual’s spouse.
Generally, the residency test is satisfied if the individual has the same
principal place of abode as the taxpayer for more than one-half of the taxable year
for which the dependency exemption deduction is claimed. Sec. 152(c)(1)(B).
Temporary absences due to special circumstances, including absences due to
illness, education, business, vacation, and military service, are not treated as
absences for purposes of determining whether the residency test is satisfied. Sec.
1.152-1(b), Income Tax Regs.; see also Rowe v. Commissioner, 128 T.C. 13
(2007); Hein v. Commissioner, 28 T.C. 826 (1957).
A child sometimes meets the qualifying child test for more than one
taxpayer.2 Under section 152(c)(4)(A), if an individual may be claimed as a
2
In general, sec. 152 is designed to ensure that a given dependent can be
claimed on only one tax return. Sec. 152(c)(4), the so-called tie-breaker rule,
(continued...)
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qualifying child by two or more taxpayers for a taxable year, the individual is
treated as the qualifying child of (1) the taxpayer who is the individual’s parent or
(2) in the case of no such parent, the individual with the highest adjusted gross
income (AGI).
Under section 152(c)(4)(B), as relevant here, if an individual may be
claimed as a qualifying child by one or both parents and they do not file a joint
return, the child is treated as the qualifying child of the parent with whom the
child resided for the longer period during the taxable year. Sec. 152(c)(4)(B)(i).
If the child resided with both parents for the same amount of time, the child is
treated as the qualifying child of the parent with the higher AGI. Sec.
152(c)(4)(B)(ii).
2
(...continued)
provides specific rules when multiple taxpayers are claiming the same child as a
qualifying child. Sec. 152(c)(4)(A) applies when those multiple claimants are any
two or more taxpayers, and sec. 152(c)(4)(B) applies when those competing
claimants are two parents of the child.
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Petitioner satisfies the relationship,3 age, support, and no joint return
requirements with respect to a qualifying child under section 152(c)(1).
Respondent, however, asserted that petitioner failed the residency test because the
children lived with Ms. Bruce for a longer period during 2010. Petitioner credibly
testified that he resided with the children for most of 2010, first in Navy housing
and then at his mother’s house and his mother-in-law’s home until he left in
December 2010. As indicated, petitioner’s absence due to military service is not
considered an absence that would otherwise cause him to fail the residency test.
Accordingly, the children lived most of 2010 with both parents and thus meet the
qualifying child test under section 152(c)(1) for both petitioner and Ms. Bruce.4
Because petitioner and Ms. Bruce could both claim the same children as
their qualifying children and they indeed claimed the children as dependents on
their separate Federal income tax returns, we must look to the tie-breaker rule to
determine who is entitled to claim the children as qualifying children.
3
“Child” is defined in sec. 152(f) to include a stepson or stepdaughter of the
taxpayer--but neither “stepson” or “stepdaughter” is defined. In Collier v.
Commissioner, T.C. Memo. 2011-126, this Court interpreted “stepdaughter” by
using its ordinary and common meaning. Accordingly, petitioner’s stepdaughter
meets the specific relationship test as a child of the taxpayer under sec.
152(c)(1)(A).
4
The remaining requirements of sec. 152(c)(1) are not in dispute.
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Petitioner must establish either that: (1) the children resided with him
longer than with Ms. Bruce for 2010 under section 152(c)(4)(B)(i), or (2) if they
resided with both parents for the same amount of time, he had the higher AGI.
The record indicates that petitioner left his mother-in-law’s house in December
2010, and it appears that the children remained with Ms. Bruce at that time.
Therefore, the children resided with Ms. Bruce for a slightly longer period during
2010. Consequently, even though each parent could claim the children as
qualifying children, the children are treated as Ms. Bruce’s qualifying children for
2010 pursuant to section 152(c)(4)(B)(i). Therefore, petitioner is not entitled to
the dependency exemption deductions for the children for 2010.
IV. Child Tax Credits
Taxpayers are allowed a credit against their income tax for each qualifying
child for whom the taxpayer was allowed a dependency exemption deduction
under section 151. Sec. 24(a). Petitioner is not entitled to dependency exemption
deductions with respect to the children for 2010; thus, he is not entitled to the
child tax credit or the additional child tax credit for each child for the 2010 taxable
year. See sec. 24(d).
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V. Earned Income Credit
Section 32(a)(1) allows an eligible individual an earned income credit to
offset that individual’s tax liability. To be considered an eligible individual, a
married taxpayer must file a joint return. Sec. 32(d). Because petitioner was
married during 2010 and is not entitled to joint return filing status for 2010, he is
not an eligible individual under section 32(a)(1). Thus, he is not entitled to the
EIC for 2010.
VI. Accuracy-Related Penalty
Section 6662(a) and (b)(1) and (2) authorizes the Commissioner to impose a
penalty equal to 20% of the portion of an underpayment of tax that is attributable
to the taxpayer’s negligence, disregard of rules or regulations, or substantial
understatement of income tax. The Commissioner bears the initial burden of
production with respect to the taxpayer’s liability for the section 6662(a) penalty.
Sec. 7491(c). The Commissioner must introduce sufficient evidence “indicating
that it is appropriate to impose the relevant penalty.” Higbee v. Commissioner,
116 T.C. 438, 446 (2001). If the Commissioner satisfies his initial burden of
production, the burden of producing evidence to refute the Commissioner’s
evidence shifts to the taxpayer, and the taxpayer must prove that the penalty does
not apply. Id. at 447.
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For the purposes of section 6662, “negligence” includes any failure to make
a reasonable attempt to comply with the Code, including any failure to keep
adequate books and records or to substantiate items properly. See sec. 6662(c);
sec. 1.6662-3(b)(1), Income Tax Regs. A “substantial understatement” includes
an understatement of income tax that exceeds the greater of 10% of the tax
required to be shown on the return or $5,000. See sec. 6662(d)(1)(A); sec. 1.6662-
4(b), Income Tax Regs.
The section 6662(a) accuracy-related penalty does not apply with respect to
any portion of an underpayment if the taxpayer proves that there was reasonable
cause for such portion and that he or she acted in good faith with respect thereto.
Sec. 6664(c)(1). The determination of whether a taxpayer acted with reasonable
cause is made on a case-by-case basis, taking into account all pertinent facts and
circumstances. Sec. 1.6664-4(b)(1), Income Tax Regs. The most important factor
in determining reasonable cause and good faith is the extent of the taxpayer’s
effort to assess his or her proper income tax liability. Id.; see also Woodsum v.
Commissioner, 136 T.C. 585, 591 (2011).
Respondent determined that petitioner was liable for the accuracy-related
penalty for 2010 because he was negligent or because he substantially understated
his income tax. Respondent has satisfied his burden by producing evidence that
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petitioner filed a joint return without the consent or authorization of his spouse
and that he failed to include his spouse’s income or deductions. Respondent
further demonstrated that the understatement of $6,804 exceeds $5,000, which is
greater than 10% of the tax required to be shown on the return.5 In this case the
understatement of income tax is computed in the same manner as and is equal to
the deficiency in dispute; that is, $6,804. See secs. 6211, 6662(d)(2).
The record reflects that although petitioner filed a 2010 joint return without
the express consent of his wife, he typically took care of the tax return preparation
during the marriage. The record reflects that Ms. Bruce presumed petitioner
would file their return and did not otherwise object when she learned that he had
in fact filed a return. Ms. Bruce later provided her bank account information to
petitioner after he had mentioned apportioning the refund they were due. Further,
petitioner credibly testified that he believed Ms. Bruce did not have her own
income in 2010 and that it was reasonable for him to believe that a joint filing
would be beneficial to the couple. Although petitioner’s initial joint return was
adjusted by the IRS as a result of the later separate return timely filed by Ms.
Bruce, petitioner has demonstrated that he acted in good faith at the time the return
was filed and has also shown that he had reasonable cause for filing the return as
5
Petitioner’s original 2010 tax return reflected tax due of zero.
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married filing jointly. Therefore, petitioner is not liable for the accuracy-related
penalty.
VII. Conclusion
For the foregoing reasons, the Court sustains respondent’s determinations
that petitioner is not entitled to the status of married filing jointly, the claimed
dependency exemption deductions, the EIC, the child tax credit, and the additional
child tax credit for tax year 2010. The Court does not sustain respondent’s
imposition of the accuracy-related penalty under section 6662(a) for tax year 2010.
We have considered all of the parties’ arguments, and, to the extent not
addressed herein, we conclude that they are moot, irrelevant, or without merit.
To reflect the foregoing,
Decision will be entered for
respondent as to the deficiency and
for petitioner as to the accuracy-
related penalty under section 6662(a).