T.C. Summary Opinion 2005-49
UNITED STATES TAX COURT
MONTRE SOMSUKCHAREAN, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 19358-03S. Filed April 19, 2005.
Montre Somsukcharean, pro se.
Mindy S. Meigs, 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 that 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 for 2002 a deficiency in petitioner’s
Federal income tax of $5,175.
The issues for decision are: (1) Whether petitioner is
entitled to dependency exemption deductions; (2) whether
petitioner is entitled to the earned income credit; and (3)
whether petitioner is entitled to the child tax credit.
Background
Some of the facts have been stipulated and are so found.
The stipulation of facts and exhibits received into evidence are
incorporated herein by reference. At the time the petition was
filed, petitioner resided in Paramount, California.
Petitioner timely filed his electronic Form 1040, U.S.
Individual Income Tax Return, for 2002 reporting income of
$18,245. Petitioner claimed dependency exemption deductions for
himself and for his sisters, K.A. and A.A.1 Petitioner’s mother,
Ms. Norma J. Taylor (Ms. Taylor), is also the mother of the
girls.
During 2002, petitioner lived with Ms. Taylor and paid her
$300 per month for his rent. His car payment was $280 monthly,
his car insurance was $80 per month, and he had credit card
payments of $20 to $35 per month.
1
The Court uses only the minor children’s initials.
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Petitioner did not take his sisters to school on a daily
basis, help them with their homework or take them to the doctor.
Ms. Taylor was the primary caregiver for the girls.
During 2002, Ms. Taylor received public assistance payments
for the girls of approximately $750 per month from the State of
California. Ms. Taylor provided respondent with a written
statement that petitioner regularly contributed money to the
household and that he was the only adult in the household who was
employed.
Respondent issued a notice of deficiency determining that
petitioner is not entitled to claim dependency exemption
deductions for his sisters, or any of the credits applicable to
the children for 2002 because he failed to substantiate his
claims.
Discussion
Deductions are a matter of legislative grace, and taxpayers
must maintain adequate records to substantiate the amounts of any
deductions or credits claimed. Sec. 6001; INDOPCO, Inc. v.
Commissioner, 503 U.S. 79, 84 (1992); sec. 1.6001-1(a), Income
Tax Regs. Taxpayers generally bear the burden of proving that
the Commissioner’s determinations are incorrect. Rule 142(a);
Welch v. Helvering, 290 U.S. 111 (1933). Section 7491 does not
apply because petitioner has failed to substantiate his
deductions.
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1. Dependency Exemption Deductions
Section 151(c) allows a taxpayer to deduct an exemption
amount for each “dependent” as defined in section 152. As
relevant here, section 152(a) defines a dependent to include a
sister 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)”.
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 he 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.
The term “support” includes food, shelter, clothing, medical
and dental care, education, and the like. Sec. 1.152-1(a)(2)(i),
Income Tax Regs. The total amount of support for each claimed
dependent furnished by all sources during the year in issue must
be established by competent evidence. Blanco v. Commissioner,
supra at 514; sec. 1.152-1(a)(1), Income Tax Regs. The amount of
support that the claimed dependent received from the taxpayer is
compared to the total amount of support the claimed dependent
received from all sources. Sec. 1.152-1(a)(2)(i), Income Tax
Regs.
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Petitioner has provided no documentary evidence regarding
any amounts he may have expended to care for the girls.
Petitioner has failed to prove that he provided over one-half
their support. The Court sustains respondent’s determination
that petitioner is not entitled to dependency exemption
deductions for them in 2002.
2. Earned Income Credit
Section 32(a)(1) allows an eligible individual an earned
income credit against the individual’s income tax liability. The
credit 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.
Petitioner claimed an earned income credit based on his
sisters qualifying children. As relevant herein, section
32(c)(3)(B) defines a “qualifying child” as a sister of the
taxpayer who the taxpayer cares for as the taxpayer’s own child,
who has the same principal place of abode as the taxpayer for
more than one-half of the taxable year, and who meets certain age
requirements.
The record demonstrates that Ms. Taylor was the primary
caregiver for the girls. The Court finds that petitioner did not
care for the children as if they were his own children, and,
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therefore, petitioner is not entitled to claim earned income
credits for them. In any event, if petitioner were eligible for
an earned income credit for the children, his earned income
exceeds the phaseout amount of $11,610.
3. Child Tax Credit
For taxable year 2002, taxpayers are allowed to claim a tax
credit of $600 for each qualifying child. Sec. 24(a). The plain
language of section 24 establishes a three-pronged test to
determine whether a taxpayer has a qualifying child. 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).
As stated supra, the Court has sustained respondent’s
determination that petitioner is not entitled to dependency
exemption deductions for the children. Thus, petitioner fails
the first prong of the test of section 24. The Court sustains
respondent’s determination regarding the section 24 child tax
credits.
Reviewed and adopted as the report of the Small Tax Case
Division.
Decision will be entered
for respondent.