T.C. Summary Opinion 2002-109
UNITED STATES TAX COURT
HELEN HUBBARD, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 10128-01S. Filed August 26, 2002.
Helen Hubbard, pro se.
Anita A. Gill, for respondent.
DEAN, 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 the year in issue, and all Rule
references are to the Tax Court Rules of Practice and Procedure.
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The decision to be entered is not reviewable by any other court,
and this opinion should not be cited as authority.
Respondent determined a deficiency of $4,436 in petitioner’s
Federal income tax for 1999.
The issues for decision are: (1) Whether petitioner is
entitled to deductions for dependency exemptions; (2) whether
petitioner is entitled to head of household filing status;1 and
(3) whether petitioner is entitled to an earned income credit.
Some of the facts have been stipulated and are so found.
The stipulation of facts and the attached exhibits are
incorporated herein by reference. At the time the petition was
filed petitioner resided in East Cleveland, Ohio.
In 1999, petitioner lived alone at her home in East
Cleveland. Petitioner’s grandmother, Rebecca Willis, lived in a
nursing home from 1998 until she died in August 1999. While Ms.
Willis lived in the nursing home she received Social Security
benefits. Petitioner’s daughter, Vidah A. Saeed, lived with her
five children, petitioner's grandchildren, in her own home and
paid her own bills. Ms. Saeed received Social Security benefits
and child-support payments from her children’s father.
Petitioner claimed dependency exemption deductions for her
grandmother, daughter, and two of her grandchildren, Akilah and
1
Our resolution of the issue of petitioner's filing status
will determine the correct computation of her standard deduction
for the year at issue.
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Zakihhah Saeed. Respondent issued a notice of deficiency
determining that petitioner was not entitled to deductions for
dependency exemptions, head of household filing status, and
earned income credit because she failed to provide substantiation
for her claims.
The first issue we address is whether petitioner is entitled
to deductions for dependency exemptions. Deductions are strictly
a matter of legislative grace, and taxpayers must satisfy the
specific requirements for any deduction claimed. See INDOPCO,
Inc. v. Commissioner, 503 U.S. 79, 84 (1992); New Colonial Ice
Co. v. Helvering, 292 U.S. 435, 440 (1934). Taxpayers are
required to maintain records sufficient to substantiate their
claimed deductions. See sec. 6001; sec. 1.6001-1(a), Income Tax
Regs.
Taxpayers generally bear the burden of proving that the
Commissioner’s determination is incorrect. Rule 142(a); Welch v.
Helvering, 290 U.S. 111 (1933). Under section 7491(a)(1),
however, the burden of proof shifts to the Commissioner if, among
other requirements, the taxpayer introduces “credible evidence
with respect to any factual issue relevant to ascertaining” his
tax liability. We find that the burden of proof does not shift
to respondent because petitioner has failed to comply with the
requirements of section 7491(a)(1).
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Section 151(c)(1) allows a taxpayer to claim an exemption
deduction for each qualifying dependent as defined in section
152. As relevant here, section 152(a)(1) defines a “dependent”
to mean a taxpayer's daughter, grandchildren, or grandparent who
received or is treated under section 152(e) as having received
over half of his or her support from the taxpayer. To qualify
for a dependency exemption deduction, a taxpayer must establish
the total support cost expended on behalf of a claimed dependent
from all sources for the year and demonstrate that she provided
over half of this amount. See Archer v. Commissioner, 73 T.C.
963, 967 (1980); Blanco v. Commissioner, 56 T.C. 512, 514-515
(1971); sec. 1.152-1(a)(2)(i), Income Tax Regs.
Petitioner argues that her grandmother and daughter meet the
relationship, gross income, and support tests provided in the
Internal Revenue Code and in the “RULES AS SET FORTH IN 1999 CAT.
NO. 12086Y and Chapter 3 of Personal Exemptions and Dependents”.
Her position is that her relatives do not need to live with her
to qualify for the deduction.
Petitioner testified that her grandmother’s only outside
source of income was Social Security. Specifically, petitioner
argues that her grandmother qualifies as a dependent because she
“lived” with petitioner under the temporary absence explanation
provided in “Chapter 3 page 23". We need not evaluate the merits
of petitioner’s argument because she failed to show the total
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support cost expended for her grandmother in 1999 and failed to
establish that she provided over half of that amount.
Petitioner also claims that she gave her daughter money
while her daughter was ill. Petitioner, however, concedes that
her daughter received Social Security benefits and child-support
payments. Petitioner failed to substantiate the total amount
expended on behalf of her daughter for support during 1999 and
that she provided over half of that amount.
Respondent argues that petitioner failed to substantiate her
claims with records, receipts, or any other evidence of
expenditures. Petitioner has offered no evidence of the total
support furnished for her grandmother or daughter and has
provided no evidence of her own contributions of support. The
Court cannot conclude that petitioner provided more than one-half
of either of their support. The Court thus holds that petitioner
is not entitled to the dependency exemption deductions for her
grandmother and daughter.
Section 152(e), support test in case of divorced parents,
etc., provides a special rule for children of separated parents.
Section 152(e)(1) provides that, if the child receives over half
of his support from his parents and he is in the custody of one
or both of his parents for more than half of the year, then the
child is treated as receiving over half of his support from the
custodial parent. Because Ms. Saeed and her children’s father
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lived apart at all times during the last 6 months of the calendar
year, and she had custody of the children, she is the custodial
parent. Sec. 152(e)(1).
Petitioner has not shown that her grandchildren did not
receive over half of their support from their parents. In the
present case, because Ms. Saeed is the custodial parent, she is
treated as providing over half the support of her children for
purposes of section 152(a). Accordingly, petitioner is not
entitled to deductions for dependency exemptions for her
grandchildren for 1999. Sec. 152(e)(1).
Section 1(b) imposes a special tax rate on individuals
filing as “heads of households”. “Head of household” is defined
to include an unmarried individual whose household is maintained
as the principal place of abode for specific family members. If
petitioner provided over half the cost of maintaining as her home
a household that for more than one-half of the year was the
principal place of abode for her daughter or a grandchild, or for
any other person who qualifies as her dependent under section
151, she meets the head of household definition in section
2(b)(1)(A).
Petitioner has not demonstrated that she maintained such a
household. Because petitioner is not entitled to a deduction for
her grandmother under section 151, her grandmother does not serve
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to qualify her for head of household filing status. See sec.
2(b)(1)(A)(ii); sec. 1.2-2(b)(3)(ii), Income Tax Regs.
In addition, we find that petitioner did not provide over
half the cost of maintaining a principal place of abode for more
than one-half of 1999 for her daughter or grandchildren. See
sec. 2(b)(1)(A)(i); sec. 1.2-2(b), (c), and (d), Income Tax Regs.
The Court thus holds that petitioner is not entitled to head of
household filing status.
Section 32(a)(1) allows an eligible individual an earned
income credit against the individual’s income tax liability.
Section 32(a)(2) and (b) limits the credit allowed based on
whether the eligible individual has no qualifying children, one
qualifying child, or two or more qualifying children. To be
eligible to claim an earned income credit with respect to a
qualifying child, a taxpayer must establish: (1) The child bears
the relationship to the taxpayer prescribed by section
32(c)(3)(B); (2) the child meets the age requirements of section
32(c)(3)(C); and (3) the child shares the same principal place of
abode as the taxpayer for more than one-half of the taxable year
as prescribed by section 32(c)(3)(A)(ii). Because petitioner has
not established that any of her grandchildren shared her
principal place of abode for more than one-half of the year at
issue, she has no qualifying children for purposes of the earned
income credit.
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Petitioner also is not eligible for the earned income credit
as an individual with no qualifying children under section
32(c)(1)(A)(ii) because her adjusted gross income in 1999 was in
excess of the complete phaseout amount prescribed by section
32(a)(2). The earned income credit is completely phased out for
individuals with no qualifying children and adjusted gross income
in excess of $10,199 for 1999. See sec. 32(a) and (b); see also
Rev. Proc. 98-61, 1998-2 C.B. 814. Petitioner had adjusted gross
income of $22,448.70 in 1999. The Court holds, therefore, that
petitioner is not entitled to an earned income credit.
Reviewed and adopted as the report of the Small Tax Case
Division.
To reflect the foregoing,
Decision will be
entered for respondent.