T.C. Summary Opinion 2004-4
UNITED STATES TAX COURT
DIEGO FRANCISCO, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 12938-02S. Filed January 21, 2004.
Diego Francisco, pro se.
Huong T. Duong, for respondent.
WOLFE, Special Trial Judge: This case was heard pursuant to
the provisions of section 7463 of the Internal Revenue Code in
effect at the time that the petition was filed. Unless otherwise
indicated, all section references are to the Internal Revenue
Code in effect at relevant times, 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 2001
Federal income tax of $4,880.30. The issues for decision are
whether petitioner is entitled to head of household filing status
and whether petitioner is entitled to a claimed earned income
credit of $3,906. Some of the facts have been stipulated and are
so found. We incorporate by this reference the parties’
stipulation of facts and the accompanying exhibits. Petitioner
was a resident of Los Angeles, California, at the time he filed
his petition.
In 2001, petitioner resided with Yolanda Margarita Guzman
(Ms. Guzman) and their two children in a three-bedroom house
owned by Ms. Guzman’s parents. Petitioner and Ms. Guzman were
not married. Their children are named Cesar Mateo Diego, born on
April 10, 1992, and Juliana Maria Diego, born on May 3, 2000.
Ms. Guzman’s parents, her brother, her sister, and her sister’s
husband and three children all resided in the same house with
petitioner, Ms. Guzman, and their two children.
On his 2001 Federal income tax return, petitioner reported
adjusted gross income (AGI) of $13,553, and computed his tax as a
head of household. He also claimed the following: Dependency
exemption deductions for Ms. Guzman and their two children, an
additional child tax credit of $355, and an earned income credit
of $3,906. Respondent disallowed petitioner’s claim to the
dependency exemption deductions, the full amount of the
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additional child tax credit, the head of household filing status,
and the full amount of the earned income credit. Respondent has
since stipulated that petitioner is entitled to the three
dependency exemption deductions and the additional child tax
credit.
Petitioner bears the burden of proving that respondent’s
determination is incorrect.1 Rule 142(a). It is well
established that the Court is not bound to accept at face value
the self-serving testimony of a taxpayer or his or her close
relatives or intimates. See, e.g., Tokarski v. Commissioner, 87
T.C. 74, 77 (1986). Additionally, a taxpayer is required to
maintain permanent books of account or records sufficient to
establish the amount of his or her gross income, deductions,
credits, or other matters required to be shown on his or her tax
return. Sec. 6001; sec. 1.6001-1(a), Income Tax Regs.
Petitioner has failed to substantiate the claims set forth in his
tax return, has failed to maintain books and records of his
relevant activities, and has failed to introduce credible
evidence to support his factual allegations. Sec. 6001; sec.
1.6001-1(a), Income Tax Regs.
The first issue for decision is whether petitioner is
entitled to head of household filing status. Section 2(b)
1
Petitioner has not satisfied the requirements of sec.
7491(a); consequently, sec. 7491(a) does not shift the burden of
proof to respondent.
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provides that a taxpayer may be considered a head of household if
the taxpayer is not married at the close of the taxable year and
maintains as his or her home a household that constitutes for
more than one-half of the taxable year the principal place or
abode, as a member of the household, of a son or a daughter or a
descendant of a son or a daughter or of certain other dependents
of the taxpayer, subject to exceptions inapplicable here. See
sec. 2(b)(1)(A). In addition, the taxpayer must furnish over
half the cost of maintaining the household for the taxable year.
See sec. 2(b)(1); see also, e.g., Estate of Fleming v.
Commissioner, T.C. Memo. 1974-137 (holding that the definition of
a “household” is determined by all of the facts and circumstances
of a particular case and is not determined solely by physical or
tangible boundaries).
Respondent contends that petitioner has not established that
he maintained a household for purposes of section 2(b), but that
petitioner is part of a larger household established by Ms.
Guzman’s parents, and, therefore, that petitioner does not
qualify as a head of household and is subject to tax at rates
prescribed for single taxpayers. Petitioner contends that the
space in Ms. Guzman’s parents’ house really was a separate one-
bedroom apartment that should itself be considered a household.
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He also contends that he paid $500 in cash per month as rent to
Ms. Guzman’s father (Julio Guzman) and otherwise supported his
separate family. We agree with respondent.
Petitioner has failed to present persuasive evidence
supporting his contentions. At trial, petitioner introduced a
handmade diagram of the house that purportedly showed that the
space occupied by petitioner, Ms. Guzman, and their two children
was physically separate from the rest of the house.2 Ms. Guzman
testified that, in addition to the bedroom, she and petitioner
and their children had their own kitchen area, bathroom, and
separate entrance. This diagram and testimony are self-serving
and uncorroborated by any disinterested witnesses. Respondent
argues that the diagram is inconsistent with municipal records
concerning the premises, particularly as to the number of
bathrooms. Neither Julio Guzman nor any other member of his
family (except Ms. Guzman, who lived with petitioner) or neighbor
or friend appeared at trial to substantiate the self-serving
evidence Ms. Guzman provided for petitioner.
Petitioner also presented a copy of an alleged lease
agreement between petitioner and Julio Guzman as well as rent
2
Ms. Guzman explained that her parents could come into her
area of the house at will, but that she and petitioner did not
have free access to the front of the house at all times. The
testimony indicates that the parents could lock the access to
their portion of the house but that petitioner and Ms. Guzman did
not have a lock for privacy.
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receipts allegedly signed by Julio Guzman for the monthly rent
payments. Once again, the alleged evidence produced by
petitioner is self-serving, uncorroborated, and unauthenticated.
All the rent receipts appear to have been prepared and signed at
the same time. Neither Julio Guzman nor his wife appeared at
trial to verify that they received monthly rent payments from
petitioner. The supposed receipts on their face are not
credible. Petitioner has failed to present persuasive evidence
about Julio Guzman’s earnings or wealth. Petitioner selected the
place of trial, and there is no apparent reason why he did not
arrange for Julio Guzman to appear and testify about the alleged
receipts, the layout of his home, and other matters concerning
the head of household issue. The failure of a party to offer
available testimony gives rise to the inference that it would
have been unfavorable to his contentions. Bresler v.
Commissioner, 65 T.C. 182, 188 (1975); Pollack v. Commissioner,
47 T.C. 92, 108 (1966), affd. 392 F.2d 409 (5th Cir. 1968);
Wichita Terminal Elevator Co. v. Commissioner, 6 T.C. 1158, 1165
(1946), affd. 162 F.2d 513 (10th Cir. 1947). Under the
circumstances of this case, we hold that petitioner is not
entitled to head of household filing status.
The second issue for decision is whether petitioner is
entitled to the claimed earned income credit. Section 32(a)(1)
provides that an “eligible individual,” subject to certain
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limitations, may claim an earned income credit. Section
32(c)(1)(A)(i) defines an “eligible individual” as including an
individual who has a “qualifying child” for the taxable year. A
“qualifying child” includes a taxpayer’s children or
grandchildren, among others, who share the taxpayer’s principal
place of abode for more than one-half of the taxable year and who
meet certain age requirements. Sec. 32(c)(3)(A) and (B)(i)(I).
If more than one individual otherwise would be treated as
eligible individuals with respect to the same qualifying child
for the same taxable year, only the individual with the highest
modified AGI for that taxable year shall be allowed the earned
income tax credit. Sec. 32(c)(1)(C).
We held above that petitioner cannot claim head of household
status because petitioner did not establish that he maintained a
separate household. Instead, the record reflects that petitioner
shared the household with Ms. Guzman’s extended family;
therefore, either of Ms. Guzman’s parents or other members of the
household might be treated as eligible individuals for purposes
of the earned income credit. See sec. 32(c)(1)(C). The inquiry
then becomes whether petitioner had a higher AGI than Ms.
Guzman’s parents or other eligible individuals living in the
household. Petitioner has failed to introduce any evidence to
demonstrate that he had a higher AGI than either of Ms. Guzman’s
parents. Ms. Guzman testified not only that she did not know
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what her father’s income was for 2001, but also that she even was
uncertain of what her father did for a living. There is no
testimony relating to the AGI of Ms. Guzman’s parents, who owned
the house in which petitioner lived, or of anyone else in the
family living in the household. Under the circumstances of this
case, we find that petitioner has not substantiated his
contention, and we therefore hold that he is not entitled to the
claimed earned income credit. Again we note that we have no
reason to doubt that petitioner could have arranged for Ms.
Guzman’s parents to testify or otherwise present evidence as to
their AGI. Petitioner failed to do so, and we must conclude that
this evidence would have been unfavorable to him. See Bresler v.
Commissioner, supra; Pollack v. Commissioner, supra; Wichita
Terminal Elevator Co. v. Commissioner, supra.
This matter was heard in Fresno, California. This Court
considered whether this matter might properly be continued to a
date and time in Los Angeles, where petitioner and petitioner’s
family resided and this Court hears cases regularly. We were
concerned that any potential witnesses, if present, would be
better able to substantiate petitioner’s contentions than only
petitioner and Ms. Guzman. Petitioner, nevertheless, chose to
proceed in the absence of any witnesses other than Ms. Guzman.
Accordingly, petitioner’s contentions were unsupported, and his
evidence was unsubstantiated and unauthenticated. He simply did
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not present credible evidence to support his position.
Respondent must be sustained on both issues presented for
decision.
Reviewed and adopted as the report of the Small Tax Case
Division.
To reflect the foregoing,
Decision will be entered
under Rule 155.