T.C. Summary Opinion 2001-23
UNITED STATES TAX COURT
EDWARD FALLS TRAMBLE-BEY, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 16518-99S. Filed March 7, 2001.
Edward Falls Tramble-Bey, pro se.
Robert J. Burbank, for respondent.
ARMEN, Special Trial Judge: This case was heard pursuant to
the provisions of section 7463 of the Internal Revenue Code in
effect at the time the petition was filed.1 The decision to be
entered is not reviewable by any other court, and this opinion
should not be cited as authority.
1
Unless otherwise indicated, all section references are to
the Internal Revenue Code in effect for 1998, and all Rule
references are to the Tax Court Rules of Practice and Procedure.
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This matter is before the Court on the parties’ cross-
motions for summary judgment. The issue for decision is whether
petitioner, an inmate at a penal institution, is entitled to an
earned income credit. As explained in greater detail below, we
shall grant respondent’s Motion for Summary Judgment and deny
petitioner's Motion for Summary Judgment.
Background
Petitioner was initially incarcerated at the Missouri
Department of Corrections in September 1997. Petitioner remained
incarcerated throughout the entire taxable year in issue, 1998,
at the Ozark Correctional Center in Fordland, Missouri. As of
the date of this opinion, petitioner remains incarcerated, and
his presumptive parole date is July 16, 2003.
While incarcerated in 1998, petitioner participated in a
work-release program. Under the terms of the program, petitioner
was permitted to leave the Ozark Correctional Center to work, but
was required to return to the correctional center each day after
work.
Pursuant to the work-release program, petitioner worked for
Pre-Stressed Casting Co. (Pre-Stressed Casting) in 1998. Pre-
Stressed Casting, a private-sector company, paid wages to
petitioner in 1998 in the amount of $2,197.66.
Petitioner filed a Federal income tax return, Form 1040EZ,
for 1998. On his return, petitioner reported adjusted gross
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income in the amount of $2,223.97, consisting of wages in the
amount of $2,197.66 and taxable interest income in the amount of
$26.31. Although petitioner reported no tax liability (because
of the availability of a personal exemption and the standard
deduction), petitioner claimed an earned income credit in the
amount of $170.
After examining petitioner’s return, respondent issued a
notice of deficiency. In the notice, respondent determined that
petitioner was not entitled to an earned income credit because he
received wages while in a penal institution. Thereafter,
petitioner invoked the Court's jurisdiction by filing a timely
petition for redetermination.
Prior to trial, respondent moved for summary judgment.
Relying on section 32(c)(2)(B)(iv) and Taylor v. Commissioner,
T.C. Memo. 1998-401, respondent contends that petitioner is not
entitled to an earned income credit because he was incarcerated
throughout the year in issue.
Petitioner also moved for summary judgment prior to trial.
Petitioner contends that he is entitled to the earned income
credit because Pre-Stressed Casting is a private-sector company
which paid him wages for work performed outside the Ozark
Correctional Center.
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Discussion
Summary judgment is intended to expedite litigation and
avoid unnecessary and expensive trials. See Florida Peach Corp.
v. Commissioner, 90 T.C. 678, 681 (1988). Summary judgment may
be granted with respect to all or any part of the legal issues in
controversy "if the pleadings, answers to interrogatories,
depositions, admissions, and any other acceptable materials,
together with the affidavits, if any, show that there is no
genuine issue as to any material fact and that a decision may be
rendered as a matter of law." Rule 121(b); Sundstrand Corp. v.
Commissioner, 98 T.C. 518, 520 (1992), affd. 17 F.3d 965 (7th
Cir. 1994); Zaentz v. Commissioner, 90 T.C. 753, 754 (1988);
Naftel v. Commissioner, 85 T.C. 527, 529 (1985). The moving
party bears the burden of proving that there is no genuine issue
of material fact, and factual inferences will be read in a manner
most favorable to the party opposing summary judgment. See
Dahlstrom v. Commissioner, 85 T.C. 812, 821 (1985); Jacklin v.
Commissioner, 79 T.C. 340, 344 (1982).
We turn now to the substantive issue that the parties’
cross-motions present.
An eligible individual is allowed an earned income credit
for the taxable year in an amount equal to the credit percentage
of so much of the taxpayer’s earned income as does not exceed the
earned income amount. See sec. 32(a)(1). Earned income includes
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wages, salaries, tips, and other employee compensation. See sec.
32(c)(2)(A)(i). However, earned income does not include any
amount received for services provided by an individual while the
individual is an inmate at a penal institution. See sec.
32(c)(2)(B)(iv).
Respondent contends that section 32(c)(2)(B)(iv) is
dispositive of the issue before us. Petitioner contends that
section 32(c)(2)(B)(iv) does not apply because his wages were
paid by a private-sector company for services rendered outside of
the Ozark Correctional Center. We agree with respondent and
disagree with petitioner.
Petitioner misconstrues section 32(c)(2)(B)(iv). Under that
section, the status of the payor (i.e., public or private entity)
is irrelevant; likewise, the situs where the services are
performed (i.e., inside or outside the prison walls) is
irrelevant. Rather, what is relevant is whether a taxpayer
provides services while the taxpayer is incarcerated. See Taylor
v. Commissioner, T.C. Memo. 1998-401; cf. Lucas v. Commissioner,
T.C. Memo. 1999-321. A taxpayer is incarcerated even when the
taxpayer is outside the prison walls pursuant to a work-release
program. In other words, a taxpayer is incarcerated for the
entire period of the taxpayer’s prison sentence or until paroled.
The legislative history of section 32(c)(2)(B)(iv) reveals
that (1) Congress designed the earned income credit to alleviate
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poverty and to provide work incentives to low-income individuals
and that (2) Congress determined that these objectives would not
be furthered if amounts paid for inmates’ services were included
in the definition of earned income. See H. Rept. 103-826 (Vol.
I) (1994); S. Rept. 103-412 (1994); see Sutherland v.
Commissioner, T.C. Memo. 2001-8. Accordingly, Congress enacted
section 32(c)(2)(B)(iv) to exclude from the definition of earned
income any amount received for services provided by an individual
while the individual is an inmate at a penal institution. See
id.
Reviewed and adopted as the report of the Small Tax Case
Division.
Conclusion
In order to give effect to the foregoing,
An order and order and decision
will be entered (1) denying petitioner's
Motion for Summary Judgment, (2) grant-
ing respondent’s Motion for Summary
Judgment, and (3) entering decision for
respondent.