T.C. Summary Opinion 2001-124
UNITED STATES TAX COURT
FERNANDO D. RIVERA, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 3740-00S. Filed August 13, 2001.
Fernando D. Rivera, pro se.
Russell D. Pinkerton, for respondent.
CARLUZZO, 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. Unless otherwise
indicated, subsequent section references are to the Internal
Revenue Code in effect for 1997, and Rule references are to the
Tax Court Rules of Practice and Procedure. The decision to be
entered is not reviewable by any other court, and this opinion
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should not be cited as authority.
Respondent determined a deficiency of $3,726 in petitioner's
1997 Federal income tax and a section 6651(a)(1) addition to tax
of $108.15. The issues for decision are: (1) Whether petitioner
is entitled to claim dependency exemption deductions for his
three nephews; (2) whether petitioner qualifies as a head of
household; (3) whether petitioner is entitled to an earned income
credit; and (4) whether petitioner is liable for the section
6651(a)(1) addition to tax.
Background
Some of the facts have been stipulated and are so found.
At the time that the petition was filed, petitioner resided in
Kokomo, Indiana.
During 1997, petitioner lived in a house owned by his
mother. He did not pay any rent to live there, but he did pay,
or contribute to, the cost of certain utilities. The house has
four bedrooms, one of which was used exclusively by petitioner’s
mother. Another bedroom was used by petitioner and, from time to
time during 1997, petitioner’s brother. The remaining two
bedrooms were shared by three of petitioner’s nephews
(petitioner’s nephews), all of whom lived in petitioner’s
mother’s house throughout 1997.
In 1991, petitioner’s nephews were abandoned by their
parents (petitioner’s sister and former brother-in-law), and they
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have lived with petitioner’s mother in her house ever since.
Petitioner’s mother is listed as the guardian/custodian of
petitioner’s nephews on various school records applicable to the
year in issue.
All of petitioner’s nephews were minors as of the close of
1997, but only one was a student for the entire year. The other
two dropped out of school and worked that year; one earned $2,408
and the other earned $1,486. Petitioner’s mother was not
employed during 1997. She received Social Security benefits
totaling $5,556. Petitioner’s brother, who from time to time
lived at petitioner’s mother’s house during 1997, had income of
$16,707 for that year. Petitioner was employed as a laborer
during 1997. His wages for that year were $14,655.
Petitioner’s mother, petitioner’s brother, and petitioner
purchased food and clothing for petitioner’s nephews during 1997.
Petitioner’s nephews did not receive any support in any form from
their parents during that year.
Petitioner’s 1997 Federal income tax return was filed on
June 25, 1998. It was prepared at no cost to petitioner by a
friend of petitioner’s brother. Petitioner did not request an
extension of time to file his 1997 return. The income earned by
two of petitioner’s nephews, as mentioned above, was erroneously
included in the wage income reported on the return. Petitioner
claimed a dependency exemption deduction for each of his nephews
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and the standard deduction applicable to a head of household. He
claimed an earned income credit computed by treating two of his
nephews as qualifying children.
In the notice of deficiency, respondent: (1) Disallowed the
dependency exemption deductions for petitioner’s nephews; (2)
changed petitioner’s filing status from head of household to
single and adjusted the standard deduction accordingly; (3)
disallowed the earned income credit claimed on petitioner’s 1997
return; and (4) imposed an addition to tax under section
6651(a)(1).
Discussion
1. Dependency Exemption Deductions
Petitioner claimed dependency exemption deductions for his
three nephews on his 1997 return. Generally, a taxpayer is
entitled to an exemption deduction for each dependent. Sec.
151(c). The term “dependent” includes a taxpayer’s nephews “over
half of whose support, for the calendar year * * * was received
from the taxpayer”. Sec. 152(a)(6). “The term ‘support’
includes food, shelter, clothing, medical and dental care,
education, and the like.” Sec. 1.152-1(a)(2)(i), Income Tax
Regs.
During 1997, petitioner’s nephews did not receive any
food, shelter, clothing, etc. from their parents. Instead,
substantially all of their support was received from petitioner,
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petitioner’s mother, and petitioner’s brother. Taking into
account petitioner’s income, the amount of his brother’s income,
the amount of Social Security benefits received by petitioner’s
mother, and the fact that petitioner’s nephews lived in
petitioner’s mother’s house, it is unlikely that petitioner
contributed more towards the support of his nephews than the
combined contributions of his mother and brother. Although
petitioner generously provided food, clothing, and other items of
support for his nephews during 1997, he failed to establish that
the total amount of the support that he provided exceeded the
support his nephews received from other sources; namely, his
brother, his mother and, with respect to two of them, themselves.
Consequently, petitioner is not entitled to dependency exemption
deductions for his nephews, and respondent’s determination in
this regard is sustained.
2. Filing Status
Petitioner filed his 1997 return as a head of household.
Under the circumstances, because petitioner is not entitled to a
dependency exemption deduction for at least one of his nephews,
he does not qualify as a head of household. Sec. 2(b)(1)(A)(ii).
Respondent’s determination changing his filing status from head
of household to single is sustained.
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3. Earned Income Credit
Subject to various conditions and limitations, an eligible
individual is entitled to an earned income credit. Sec. 32(a).
Petitioner was an eligible individual within the meaning of the
applicable statute. Sec. 32(c)(1)(A)(i) and (ii). Nevertheless,
because of the amount of his income, he is not entitled to an
earned income credit for 1997 unless at least one of his nephews
was a qualifying child with respect to him for that year. Sec.
32(b).
On his 1997 return, petitioner claimed an earned income
credit computed by treating two of his nephews as qualifying
children. Among other requirements, to be treated as an eligible
child of a taxpayer, the child must be: (1) A son or daughter
of the taxpayer; (2) a descendant of a son or daughter of the
taxpayer; (3) a stepson or stepdaughter of the taxpayer; or (4)
an eligible foster child of the taxpayer. Sec. 32(c)(3)(B)(i).
Petitioner’s nephews obviously are not his children, descendants
of his children, or his stepchildren. Furthermore, they were not
his eligible foster children because, although he generously
contributed towards their support, he did not care for them as
his own children. Sec. 32(c)(3)(B)(iii). According to school
records, petitioner’s mother, rather than petitioner, was the
guardian/custodian of petitioner’s nephews during the year in
issue. It follows that respondent’s determination that
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petitioner is not entitled to an earned income credit for 1997
should be sustained, and we so hold.
4. Section 6651(a)(1) Addition to Tax
Petitioner did not request an extension to file his 1997
return. Consequently, it was due on or before April 15, 1998,
sec. 6072(a), but it was not filed until June 25, 1998.
Section 6651(a)(1) provides for an addition to tax of 5
percent of the amount of the tax required to have been shown on
the return if the failure to file is for not more than 1 month,
with an additional 5 percent for each month in which the failure
to file continues, to a maximum of 25 percent of the tax in the
aggregate. If an income tax return is not filed within 60 days
of the prescribed date for filing (including extensions), the
addition to tax imposed is not less than the lesser of $100 or
100 percent of the amount required to be shown as tax on the
return. Sec. 6651(a). The addition to tax is applicable unless
it is shown that the failure to file is due to reasonable cause
and not due to willful neglect. Id.
Petitioner’s 1996 return was filed more than 60 days after
April 15, 1997. Petitioner did not explain why his 1996 return
was filed late. Because petitioner has not demonstrated that his
failure to file a timely 1996 Federal income tax return was due
to reasonable cause and not due to willful neglect, he is liable
for the addition to tax under section 6651(a)(1).
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Reviewed and adopted as the report of the Small Tax Case
Division.
Based on the foregoing, and to reflect the agreement between
the parties as to the correct amount of petitioner’s wage income
for 1997,
Decision will be
entered under Rule 155.