T.C. Summary Opinion 2002-145
UNITED STATES TAX COURT
VIRGIL CATO, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 10753-01S. Filed November 12, 2002.
Andrew N. Gross, for petitioner.
Pamela L. Mable, 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.
The decision to be entered is not reviewable by any other court,
and this opinion should not be cited as authority.
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Respondent determined a deficiency in petitioner’s Federal
income tax for 1998 of $1,752, and an addition to tax of $161.70
under section 6651(a)(1). After trial, respondent filed a motion
to assert a claim for an increased deficiency. This Court
granted respondent’s motion. After concessions,1 the issues that
remain for decision are: (1) Whether petitioner is entitled to
claim dependency exemption deductions; and (2) whether petitioner
is entitled to claim the child tax credit.
Some of the facts have been stipulated and are so found.
The stipulation of facts and the accompanying exhibits are
incorporated herein by reference. At the time the petition was
filed, petitioner resided in Decatur, Georgia.
Background
Petitioner married Lillian Cato in 1980. During their
marriage they had three children, Shayla, and twins, Keith and
Kevin. Petitioner and Ms. Cato divorced on August 12, 1992. The
divorce decree states that Ms. Cato “shall be the custodian and
residential parent of the three-minor children”. The divorce
decree also specifies that petitioner is responsible for child
support of $800 per month, maintaining dependent health
1
In the notice of deficiency respondent determined that
petitioner was not entitled to head of household filing status.
Petitioner concedes that he is not entitled to file as a head of
household and that he is liable for the addition to tax for
failure to file timely his Federal income tax return.
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insurance, and maintaining life insurance for the children’s
benefit. Additionally, the decree established that
For the tax year 1992, [petitioner] shall be
entitled to take all three children as exemptions under
his State and Federal filing. Each year thereafter,
[petitioner] shall be entitled to the oldest child and
one of the youngest children who are twins. These
exemptions are strictly contingent upon [petitioner]
paying and being current on all child support as
previously set out herein.
In 1998, the Superior Court of DeKalb County modified the
divorce decree by an Order for Child Support (child support
order). The child support order entitled petitioner to claim
dependency exemptions for Shayla as a dependent on his State and
Federal tax returns for 1997 and 1998. The court entered an
Income Deduction Order for petitioner to pay $500 towards his
child support arrearage. The child support order further states
that any provision of the original divorce decree not
specifically modified in the child support order remains in full
force and effect.
Petitioner filed his 1998 Federal income tax return as head
of household and reported income of $55,785. Petitioner claimed
dependency exemption deductions for his daughter and his son
Kevin and two child tax credits. Respondent issued a notice of
deficiency determining that petitioner is not entitled to head of
household filing status, the dependency exemption deduction for
his son Kevin, or the child tax credit because he failed to
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substantiate his claims. Respondent has claimed an increased
deficiency in his answer alleging that petitioner is not entitled
to a dependency exemption deduction or a child tax credit for his
daughter.
Discussion
1. Dependency Exemption Deductions2
Section 151(c) allows a taxpayer to deduct an exemption
amount for each "dependent" as defined in section 152. Section
152(a) defines a dependent to include a son or daughter of the
taxpayer, “over half of whose support, for the calendar year in
which the taxable year of the taxpayer begins, was received from
the taxpayer (or is treated under subsection (c) or (e) as
received from the taxpayer)”.
In the case of a child of divorced parents, section
152(e)(1) provides that if a child receives over half of his
support from parents who are divorced under a decree of divorce
and the child is in the custody of one or both of his parents for
more than one-half of the year, then the child will be treated as
receiving over half of his support from the parent having custody
for a greater portion of the calendar year. Section 1.152-4(b),
Income Tax Regs., provides that the term "custody" is "determined
by the terms of the most recent decree of divorce". Because the
2
The Court decides this case without regard to the burden
of proof. Accordingly, the Court need not decide whether current
sec. 7491(a)(1) is applicable in this case. See Higbee v.
Commissioner, 116 T.C. 438 (2001).
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divorce decree grants Ms. Cato full custody of the three
children, she is considered their "custodial parent" under
section 152(e). Cafarelli v. Commissioner, T.C. Memo. 1994-265.
Petitioner contends that because he was in compliance with
the terms of the divorce decree, as modified by the child support
order, he is entitled to the claimed deductions. Petitioner
claims that because he did not miss a monthly child support
payment in 1998 and he was current on his payments as required by
the child support order he is entitled to the deductions for
Shayla and Kevin. The Court, however, need not discuss the
merits of this argument because petitioner, as the noncustodial
parent, did not abide by the statutory requirements as explained
below.
The requirements of section 152(e) must be met regardless of
the language of the State court divorce decree. See Miller v.
Commissioner, 114 T.C. 184 (2000), affd. sub nom. Lovejoy v.
Commissioner, 293 F.3d 1200 (10th Cir. 2002). Petitioner as the
"noncustodial parent", is allowed to claim Shayla and Kevin as
dependents only if one of the three statutory exceptions in
section 152(e) is met. Under these exceptions, the "noncustodial
parent" is treated as providing over half of a child's support
if: (1) Pursuant to section 152(e)(2), the custodial parent
signs a written declaration that such custodial parent will not
claim such child as a dependent, and the noncustodial parent
attaches such written declaration to the noncustodial parent's
return for the taxable year; (2) pursuant to section 152(e)(3),
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there is a multiple-support agreement between the parties as
provided in section 152(c); or (3) pursuant to section 152(e)(4),
there is a qualified pre-1985 instrument providing that the
noncustodial parent shall be entitled to any deduction allowable
under section 151 for such child, provided that certain other
requisites, not pertinent here, are met.
None of the exceptions applies to this case. A multiple-
support agreement was not in effect; the decree of divorce was
executed after 1984; and Ms. Cato did not release her claim to
the exemptions. In 1998, Ms. Cato did not sign a Form 8332,
Release of Claim to Exemption for Child of Divorced or Separated
Parents, or any similar statement substantially in the form of a
Form 8332, to release to petitioner her right to claim deductions
for certain dependency exemptions. Petitioner did not attach a
Form 8332 or anything substantially similar to his Federal tax
return for 1998. See Miller v. Commissioner, supra.
Petitioner is unable to show that he complied with the
requirements of section 152; thus, the Court sustains
respondent's determination that petitioner is not entitled to the
dependency exemption deductions for Shayla and Kevin in 1998.
2. Child Tax Credit
Respondent determined that petitioner is not entitled to
claim child tax credits on his 1998 return because he is unable
to substantiate that any one of his and Ms. Cato’s children was a
“child” as defined in section 151.
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For the taxable year 1998, taxpayers are allowed to claim a
tax credit of $400 for each qualifying child. Sec. 24(a).
Section 24(c)(1) defines a “qualifying child” as any individual
if:
(A) the taxpayer is allowed a deduction under
section 151 with respect to such individual for the
taxable year,
(B) such individual has not attained the age of 17
as of the close of the calendar year in which the
taxable year of the taxpayer begins, and
(C) such individual bears a relationship to the
taxpayer described in section 32(c)(3)(B). [Emphasis
added.]
The plain language of section 24 establishes a three-pronged test
to determine whether a taxpayer has a qualifying child. In
effect, if one of the qualifications is not met, the claimed
child tax credit must be disallowed. The first element of the
three-pronged test requires that a taxpayer must have been
allowed a deduction for that child under section 151. Sec.
24(c)(1)(A).
Respondent determined that petitioner is not entitled to
section 151 dependency exemption deductions for Shayla and Kevin
for 1998. The Court has held that respondent’s determination
regarding the section 151 deductions are valid. That holding is
dispositive of this issue, and, as a result, the Court sustains
respondent’s determination regarding the section 24 child tax
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credits and holds, because of the plain language of the statute,
that petitioner is not entitled to the claimed child tax credits.
Reviewed and adopted as the report of the Small Tax Case
Division.
Decision will be entered
under Rule 155.