T.C. Summary Opinion 2005-167
UNITED STATES TAX COURT
ELROY SMITH, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 16623-04S. Filed November 14, 2005.
Elroy Smith, pro se.
James R. Rich, for respondent.
GOLDBERG, 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. The decision to be
entered is not reviewable by any other court, and this opinion
should not be cited as authority. 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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Respondent determined a deficiency in petitioner’s Federal
income tax of $3,290 for the taxable year 2003.
The issues for decision are: (1) Whether petitioner is
entitled to claim a dependency exemption deduction for DS;1 (2)
whether petitioner is entitled to head-of-household filing
status; (3) whether petitioner is entitled to an earned income
credit; and (4) whether petitioner is entitled to a child tax
credit for taxable year 2003.
Background
Some of the facts have been stipulated and are so found.
The stipulation of facts and the attached exhibits are
incorporated herein by this reference. Petitioner resided in
Jackson, South Carolina, on the date the petition was filed in
this case.
During taxable year 2003, petitioner resided in a dwelling
next to that of his sister, Yvonne Smith (Yvonne), who was
single. Yvonne has a son DS, who turned 17 years old during
taxable year 2003, and who lived with Yvonne.
Also, during taxable year 2003, petitioner was employed as a
long-distance truck driver by J.B. Hunt Transport, Inc.
Additionally, petitioner was self-employed by his own truck
company, E. Smith Trucking Company. J.B. Hunt Transport, Inc.
issued to petitioner a Form W-2, Wage and Tax Statement, which
1
The Court uses only the minor child’s initials.
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reflected wages earned in the amount of $4,400.63. Petitioner
reported business income in the amount of $9,094 from E. Smith
Trucking Company, on his 2003 Form 1040, U.S. Individual Income
Tax Return. Petitioner’s normal job schedule during taxable year
2003 was to be on the road 3 consecutive weeks, then return to
his residence for 3 days, and then go back on the road.
On or about March 27, 2004, petitioner timely filed his Form
1040 for taxable year 2003. Petitioner filed his 2003 Federal
income tax return as a head-of-household and claimed a dependency
exemption deduction for DS. Petitioner also claimed an earned
income credit with DS as the qualifying child and a child tax
credit with DS as the qualifying child.
On October 12, 2004, respondent issued a notice of
deficiency denying petitioner (1) the claimed dependency
exemption deduction, (2) head-of-household filing status, (3) the
claimed earned income credit, and (4) the claimed child tax
credit for taxable year 2003.
Discussion
In general, the Commissioner’s determination set forth in a
notice of deficiency is presumed correct. Welch v. Helvering,
290 U.S. 111, 115 (1933). In pertinent part, Rule 142(a)(1)
provides the general rule that “The burden of proof shall be upon
the petitioner”. In certain circumstances, however, if the
taxpayer introduces credible evidence with respect to any factual
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issue relevant to ascertaining the proper tax liability, section
7491 places the burden of proof on the Commissioner. Sec.
7491(a)(1); Rule 142(a)(2). Credible evidence is “‘the quality
of evidence which, after critical analysis, * * * [a] court would
find sufficient * * * to base a decision on the issue if no
contrary evidence were submitted’”.2 Baker v. Commissioner, 122
T.C. 143, 168 (2004) (quoting Higbee v. Commissioner, 116 T.C.
438, 442 (2001)). Section 7491(a)(1) applies only if the
taxpayer complies with substantiation requirements, maintains all
required records, and cooperates with the Commissioner for
witnesses, information, documents, meetings, and interviews.
Sec. 7491(a)(2). Although neither party alleges the
applicability of section 7491(a), we conclude that the burden of
proof has not shifted to respondent with respect to any of the
issues in the case at bar.
Moreover, deductions are a matter of legislative grace and
are allowed only as specifically provided by statute. INDOPCO,
Inc. v. Commissioner, 503 U.S. 79, 84 (1992); New Colonial Ice
Co. v. Helvering, 292 U.S. 435, 440 (1934).
2
We interpret the quoted language as requiring the
taxpayer’s evidence pertaining to any factual issue to be
evidence the Court would find sufficient upon which to base a
decision on the issue in favor of the taxpayer. See Bernardo v.
Commissioner, T.C. Memo. 2004-199.
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1. Deduction for Dependency Exemption
As previously stated, petitioner claimed a dependency
exemption deduction for DS on his 2003 Federal income tax return.
Respondent disallowed the deduction in the notice of deficiency.
Section 151 allows deductions for exemptions for dependents
of the taxpayer. See sec. 151(c). Section 152(a) defines the
term “dependent”, in pertinent part, to include a son or daughter
of a brother or sister of the taxpayer over half of whose
support, for the calendar year was received from the taxpayer.
“Support” includes “food, shelter, clothing, medical and dental
care, education, and the like.” Sec. 1.152-1(a)(2)(i), Income
Tax Regs.
In determining whether an individual received more than one-
half of his or her support from the taxpayer, there shall be
taken into account the amount of support received from the
taxpayer as compared to the entire amount of support which the
individual received from all sources. Id. In other words, the
support test requires the taxpayer to establish the total support
costs for the claimed individual and that the taxpayer provided
at least half of that amount. Archer v. Commissioner, 73 T.C.
963, 967 (1980); see Cotton v. Commissioner, T.C. Memo. 2000-333;
Gulvin v. Commissioner, T.C. Memo. 1980-111, affd. 644 F.2d 2
(5th Cir. 1981); Toponce v. Commissioner, T.C. Memo. 1968-101. A
taxpayer who cannot establish the total amount of support costs
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for the claimed individual generally may not claim that
individual as a dependent. Blanco v. Commissioner, 56 T.C. 512,
514-515 (1971); Cotton v. Commissioner, supra.
Petitioner testified that DS resided with his mother,
Yvonne, during taxable year 2003. However, petitioner claims
that DS resided at petitioner’s house when petitioner was home
and that he provided DS with food and shelter. As previously
stated, petitioner’s house was located on a plot of land adjacent
to Yvonne’s residence. Petitioner, a long-distance truck driver,
was on the road 3 consecutive weeks at a time, then returned to
his residence for 3 days, and then went back on the road.
Petitioner testified that when he was at his residence he spent
50 percent of his time with his nephew, DS. Giving petitioner
the benefit of the doubt and taking petitioner upon his word, we
conclude that DS could have only resided with petitioner for
about 50 days during taxable year 2003.
Petitioner further testified that he supported his nephew,
DS. Petitioner stated that he would send checks to his mother,
Lydia Smith. She then would cash the checks and give the money
to Yvonne to pay for DS’s expenses. Petitioner claims that he
paid for DS’s car, automobile insurance, shoes, clothing, and
other necessities during taxable year 2003.
Petitioner has offered into evidence copies of checks which
he claims were support payments for DS. However, the checks are
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not all made out to Lydia Smith, as would be expected by the
support arrangement described by petitioner. Additionally, the
checks are all dated during the taxable years 2004 and 2005.
We are convinced that, during 2003, petitioner paid various
expenses for DS and was a caring uncle to DS. However,
petitioner has failed to provide the Court with any significant
corroborative evidence showing that he provided over half of DS’s
support during the 2003 taxable year.
Upon the basis of the record before us, we cannot find that
petitioner has established the total support costs for DS during
taxable year 2003, nor has he established that he provided at
least half of that amount. Respondent’s determination on this
issue is sustained.
2. Head of Household
As previously stated, petitioner claimed head-of-household
filing status on his 2003 Federal income tax return, and
respondent changed the filing status to single in the notice of
deficiency.
Section 1(b) imposes a special income tax rate on an
individual filing as head of household. Section 2(b) provides
the requirements for head-of-household filing status. As
relevant here, to qualify as a head of a household a taxpayer
must (a) be unmarried at the end of the taxable year, (b) not be
a surviving spouse, and (c) maintain as the taxpayer’s home a
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household that constitutes the principal place of abode of a
dependent for whom the taxpayer is entitled to claim a deduction
under section 151. Sec. 2(b)(1)(A)(ii).
We have already held that petitioner is not entitled to the
dependency exemption deduction pursuant to section 151 with
respect to DS. It follows, therefore, that petitioner is not
entitled to claim head-of-household filing status. We sustain
respondent’s determination with respect to this issue.
3. Earned Income Credit
As previously stated, petitioner claimed an earned income
credit for taxable year 2003 with DS as the qualifying child. In
the notice of deficiency, respondent disallowed the earned income
credit.
Subject to certain limitations, an eligible individual is
allowed a credit which is calculated as a percentage of the
individual’s earned income. Sec. 32(a)(1). Earned income
includes wages. Sec. 32(c)(2)(A). Section 32(c)(1)(A)(i), in
pertinent part, defines an “eligible individual” as “any
individual who has a qualifying child for the taxable year”. A
“qualifying child” is one who satisfies a relationship test, a
residency test, and an age test. Sec. 32(c)(3). The pertinent
parts of section 32(c)(3) provide:
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(3) Qualifying Child.--
(A) In general.--The term “qualifying child” means,
with respect to any taxpayer for any taxable year, an
individual--
(i) who bears a relationship to the taxpayer
described in subparagraph (B),
(ii) who has the same principal place of abode as
the taxpayer for more than one-half of such taxable
year, and
(iii) who meets the age requirements of
subparagraph (C).
As relevant herein, a descendant of a brother or sister, who
the taxpayer cares for as the taxpayer’s own child, satisfies the
relationship test. We are willing to assume DS satisfies the
relationship test.
However, as previously stated, petitioner has not
established that his residence was the principal place of abode
for DS for more than one-half of the taxable year 2003. We find
that DS fails the residency test of section 32(c)(3)(ii).
Accordingly, respondent’s determination on this issue is
sustained.
4. Child Tax Credit
As previously stated, petitioner claimed a child tax credit
for taxable year 2003 with DS as the qualifying child. In the
notice of deficiency, respondent disallowed the child tax credit.
Section 24(a) authorizes a child tax credit with respect to
each “qualifying child” of the taxpayer. The term “qualifying
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child” is defined in section 24(c). As relevant here, a
“qualifying child” means an individual with respect to whom the
taxpayer is allowed a deduction under section 151. Sec.
24(c)(1)(A).
We have already held that petitioner is not entitled to the
dependency exemption deduction under section 151 for DS.
Accordingly, DS is not considered a “qualifying child” within the
meaning of section 24(c). It follows, therefore, that petitioner
is not entitled to a child tax credit under section 24(a) with
respect to DS.
In view of the foregoing, we sustain respondent’s
determination on this issue.
Furthermore, we have considered all of the other arguments
made by petitioner, and, to the extent that we have not
specifically addressed them, we conclude they are without merit.
Reviewed and adopted as the report of the Small Tax Case
Division.
Decision will be entered
for respondent.