T.C. Summary Opinion 2002-75
UNITED STATES TAX COURT
JOHN J. DEWALD, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 1503-01S. Filed June 26, 2002.
John J. DeWald, pro se.
James N. Beyer, for respondent.
DINAN, 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. 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.
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Respondent determined a deficiency in petitioner’s Federal
income tax of $4,470 for the taxable year 1998.
The issues for decision are whether petitioner is entitled
to: (1) Two dependency exemption deductions; (2) head of
household filing status; and (3) an earned income credit based on
two qualifying children.
Some of the facts have been stipulated and are so found.
The stipulations of fact and the attached exhibits are
incorporated herein by this reference. Petitioner resided in
Orangeville, Pennsylvania, on the date the petition was filed in
this case.
From March 1998 through December 1998, petitioner resided in
his sister’s apartment. He resided with his sister, Susan
DeWald, his sister’s boyfriend, Ronald Yorks, and his sister’s
two children, Brianna DeWald and Cody Livingston, who turned 5
and 4 years old during 1998, respectively. Petitioner and his
wife, who then was his girlfriend, would often babysit the
children while Ms. DeWald and Mr. Yorks were “on the road.”
Petitioner would also provide transportation for Cody, who
required special medical treatment, and for Brianna.
During 1998, no rent was paid for the apartment by any of
the tenants because it was government subsidized housing.
Petitioner received combined wage income of $13,613 from
Workforce Solutions, Inc. and Travel Ports of America. As a part
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of his employment, petitioner worked at Buck Horn Family
Restaurant. At the time of trial, petitioner was still working
at this restaurant, earning approximately $25,000 per year.
During 1998, petitioner owned an automobile and was making
monthly payments with respect thereto. Petitioner also made
monthly insurance payments with respect to this automobile and
with respect to an automobile owned by Ms. DeWald. While he
resided with his sister, petitioner contributed to the payment of
telephone and electric bills, the purchase of food for the
household, and the purchase of clothing for the children.
During 1998, Ms. DeWald was employed for a portion of the
year, earning $2,921. In addition, she received food stamps
during the entire year which she used to purchase food for all
those residing in the apartment, and she received an unspecified
amount of welfare assistance.
Petitioner filed an individual Federal income tax return for
taxable year 1998. On this return, petitioner claimed head of
household filing status and claimed two dependency exemption
deductions for Brianna and Cody. Petitioner also claimed an
earned income credit naming Brianna and Cody as qualifying
children; the return stated that they were petitioner’s foster
children and that they resided with petitioner for the entire
year.
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In the statutory notice of deficiency, respondent changed
petitioner’s filing status to single, disallowed the dependency
exemption deductions, and disallowed the earned income credit.
The first issue for decision is whether petitioner is
entitled to two dependency exemption deductions.
Subject to various exceptions and limitations not applicable
here, a deduction generally may be allowed under section 151(a)
for each dependent of a taxpayer. Sec. 151(a), (c)(1). A
taxpayer’s niece or nephew generally is a dependent of the
taxpayer only if the taxpayer provides over half of the niece’s
or nephew’s support for the taxable year. Sec. 152(a)(6).
We are convinced that, during most of 1998, petitioner paid
various expenses for the children and had significant
responsibility in caring for them. However, petitioner has
failed to provide the Court with any significant corroborative
evidence showing that he provided over half their support during
that year. A major component of the children’s support was their
housing, but because petitioner was residing in his sister’s
apartment for which he paid no rent, the rental charge for the
apartment was provided by a source other than petitioner. See
sec. 1.152-1(a)(2)(i), Income Tax Regs. Furthermore, petitioner
only resided with Brianna and Cody for 9 to 10 months during
1998, and presumably was providing for none of their support
during the remaining 2 to 3 months. Based on the record before
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us, we cannot find that petitioner paid over half of the support
for Brianna and Cody during 1998.
The second issue for decision is whether petitioner is
entitled to head of household filing status.
An unmarried taxpayer with no children or stepchildren is
entitled to head of household filing status only if the taxpayer
maintains as his household the principal place of abode, for more
than half the year, of at least one individual who entitles the
taxpayer to a dependency exemption deduction under section 151.
Sec. 2(b)(1). Because petitioner did not establish that he
furnished over half the cost of maintaining the household, and
because neither Brianna nor Cody entitles petitioner to a
dependency exemption deduction for 1998, petitioner is not
entitled to head of household filing status for that year.
The third issue for decision is whether petitioner is
entitled to an earned income credit based on two qualifying
children.
Under section 32, an eligible taxpayer is allowed a credit
which is calculated as a percentage of the taxpayer’s earned
income, subject to certain limitations. Sec. 32(a)(1).
Taxpayers who have qualifying children are allowed a larger
credit and are entitled to a credit at higher income levels than
are individuals without qualifying children. Sec. 32(a), (b).
Because petitioner’s earned income was $13,613 during the year in
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issue, he is entitled to an earned income credit only if he had
qualifying children during that year. Id.
Under section 32, qualifying children of a taxpayer include
only (1) children of the taxpayer, or descendants of such
children; (2) stepchildren of the taxpayer; and (3) eligible
foster children of the taxpayer. Sec. 32(c)(3)(A), (B).
Eligible foster children include only certain individuals who
have the same principal place of abode as the taxpayer for the
entire taxable year. Sec. 32(c)(3)(B)(iii)(II). Brianna and
Cody were neither children nor stepchildren of petitioner, and
they resided with petitioner for less than the entire taxable
year 1998. Consequently, petitioner is not entitled to an earned
income credit for 1998.
Reviewed and adopted as the report of the Small Tax Case
Division.
To reflect the foregoing,
Decision will be entered
for respondent.