T.C. Summary Opinion 2003-106
UNITED STATES TAX COURT
WILLIAM T. ELLIOTT, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 12262-01S. Filed July 25, 2003.
Tommy E. Swate, for petitioner.
Daniel N. Price, 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 $2,530 in petitioner’s
Federal income tax for 2000. The only issue for decision is
whether petitioner is entitled to the earned income credit he
claimed.1
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 Corpus Christi, Texas.
In 2000, petitioner lived with Glennie Huff and her two
sons, Ashton Huff and Marquin Huff. Petitioner and Ms. Huff were
never married in an official marriage ceremony, nor were they
issued a valid marriage license. Petitioner is not the
biological father of Ashton or Marquin, and no State placed them
with him as foster children.
Petitioner filed his Federal income tax return as head of
household claiming dependency exemption deductions for Ashton and
Marquin and an earned income credit naming Ashton and Marquin as
qualifying children. Respondent issued a notice of deficiency
1
The Court need not address whether petitioner is entitled
to head of household filing status or dependency exemption
deductions because, with the standard deduction and a single
personal exemption, petitioner had zero taxable income and zero
tax liability for the year in issue. As a result, neither
petitioner's filing status nor any deductions bear on the outcome
of this case.
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determining that petitioner is not entitled to deductions for
dependency exemptions, head of household filing status, and
earned income credit because he failed to provide substantiation
for his claims.
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. The Court finds that the burden of proof does not
shift to respondent because petitioner has failed to comply with
the requirements of section 7491(a)(1).
Under section 32, an eligible individual is allowed a credit
which is calculated as a percentage of the individual's earned
income. Sec. 32(a)(1). 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.
Initially, petitioner argues that because he treated Ashton
and Marquin similarly on previous unchallenged returns, his
consistent treatment should not now be questioned. Each taxable
year, however, stands alone, and the Commissioner may challenge
in a succeeding year what was condoned or agreed to in a former
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year. Rose v. Commissioner, 55 T.C. 28 (1970). Thus, a taxpayer
must follow the reporting requirements in any given taxable year
to be entitled to a credit even if the Commissioner did not
challenge a similarly claimed credit in a prior year. As a
result, what happened with petitioner's past tax returns is not
relevant to the decision in this case.
Respondent argues that petitioner had no qualifying children
in 2000 because no individual met the relationship and residency
requirements of section 32(c)(3).
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).
As is relevant to the relationship test, the definition of a
qualifying child includes a child or a stepchild of the taxpayer.
Sec. 32(c)(3). Petitioner's position is that Ashton and Marquin
were qualifying children for purposes of the earned income credit
because they are his stepchildren. Petitioner claims they
qualify as his stepchildren because he and Ms. Huff were in a
valid "common law" marriage pursuant to the laws of the State of
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Texas. Respondent's position is that their "common law" marriage
does not comport with the requirements of the statute.
Section 2.401 of the Texas Family Code provides a three part
conjunctive test to determine if a man and a woman are in a valid
"common law" marriage. The third part of the "common law" test
requires the couple to hold themselves out to others as though
they were married. Tex. Fam. Code Ann. sec. 2.401 (Vernon 2002).
In McChesney v. Johnson, 79 S.W.2d 658, 659 (Tex. Civ. App. 1934)
the court stated that "the agreement is fundamental and
cohabitation is an element, but the holding out to the public as
being man and wife is the acid test." A couple's conduct and
actions alone are sufficient to satisfy this element; whereas
spoken words are not necessary to establish marital status.
Winfield v. Renfro, 821 S.W.2d 640, 648 (Tex. App. 1991). When
questioned by respondent's counsel whether she held herself out
to others as being married to petitioner, Ms. Huff testified that
she did not hold herself out to third parties, or tell anyone,
that she and petitioner were married.
The Court finds, therefore, that petitioner was not married,
common law or otherwise, to Ms. Huff in 2000. As a result, the
Court also finds that Ashton and Marquin, for purposes of section
32, were not petitioner's stepchildren. Because petitioner has
not established that Ashton or Marquin met the relationship test
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established in section 32(c)(3)(B), he has no qualifying children
for purposes of the earned income credit.
If petitioner had established that he is married, common law
or otherwise, he then would be precluded from claiming the earned
income credit because married persons must file a joint return if
they wish to claim an earned income credit. Sec. 32(d).
Petitioner is, however, eligible for an earned income credit
as an individual with no qualifying children under section
32(c)(1)(A)(ii) because his adjusted gross income in 2000 was in
excess of the threshold phaseout amount but below the complete
phaseout amount prescribed by section 32(a)(2). The earned
income credit begins to phaseout for individuals with no
qualifying children and adjusted gross income in excess of $5,770
for 2000. See sec. 32(a) and (b); see also Rev. Proc. 99-42,
1999-2 C.B. 568. The earned income credit is completely phased
out for individuals with no qualifying children and adjusted
gross income in excess of $10,380 for 2000. See sec. 32(a) and
(b); see also Rev. Proc. 99-42, 1999-2 C.B. 568. Petitioner had
adjusted gross income of $6,347 in 2000. The Court holds,
therefore, that petitioner is entitled to an earned income credit
as an individual with no qualifying children.
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Reviewed and adopted as the report of the Small Tax Case
Division.
To reflect the foregoing,
Decision will be entered under
Rule 155.