T.C. Summary Opinion 2005-185
UNITED STATES TAX COURT
RAFAEL MANZUETA, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 23394-04S. Filed December 21, 2005.
Rafael Manzueta, pro se.
Nina P. Ching, for respondent.
DEAN, Special Trial Judge: This case was heard pursuant to
the provisions of sections 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 as in effect for the year at 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 of $4,798 for 2003. The issues for decision are
whether petitioner: (1) Is entitled to deductions for dependency
exemptions, (2) is entitled to head of household filing status,1
(3) is entitled to an earned income credit, and (4) is entitled
to an “additional child tax credit”.
Background
The stipulated facts and exhibits received into evidence are
incorporated herein by reference. At the time the petition in
this case was filed, petitioner resided in Ayer, Massachusetts.
Petitioner has two sons, RM, born on May 12, 1983, and JM,
born on July 30, 1995. Petitioner is married to, but separated
from, Estacia Ovalle (Ms. Ovalle), who is the mother of RM.
Petitioner and Ms. Ovalle are in the process of seeking a
divorce. JM’s mother is Yosary Manzueta. During 2003, both RM
and JM lived with Ms. Ovalle.
During 2003, petitioner was employed as a driver by Trombly
Motor Coach Services, Inc. Petitioner timely filed a 2003 U.S.
Individual Income Tax Return Form 1040A reporting wages of
$11,757 and adjusted gross income of $12,472.
1
The Court’s resolution of the issue of petitioner’s filing
status will determine the correct computation of his standard
deduction for 2003.
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In the notice of deficiency, respondent determined that
petitioner’s filing status was single rather than head of
household. Respondent also determined that petitioner was not
entitled to: (1) Deductions for dependency exemptions, (2) an
earned income credit, or (3) an “additional child tax credit”.
Discussion
The Commissioner’s determinations are presumed correct, and
generally taxpayers bear the burden of proving otherwise.2 Rule
142(a)(1); Welch v. Helvering, 290 U.S. 111, 115 (1933).
Dependency Exemption
Petitioner claimed dependency exemptions for RM and JM for
2003. Respondent disallowed the deductions in the notice of
deficiency.
Section 151(c)(1) allows a taxpayer to claim an exemption
deduction for each qualifying dependent. A child of the taxpayer
is considered a “dependent” so long as the child has not attained
the age of 19 at the close of the calendar year in which the
taxable year of the taxpayer begins, and more than half the
dependent’s support for the taxable year was received from the
taxpayer. Secs. 151(c)(1)(B), 152(a)(1). The age limit is
2
Petitioner has not raised the issue of sec. 7491(a), which
shifts the burden of proof to the Commissioner in certain
situations. This Court concludes that sec. 7491 does not apply
because petitioner has not produced any evidence that establishes
the preconditions for its application.
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increased to 24 if the child was a student as defined by section
151(c)(4). Sec. 151(c)(1)(B).
Respondent concedes that petitioner is entitled to claim a
dependency exemption for JM on his 2003 Federal income tax
return. RM attained the age of 20 in 2003. Petitioner concedes
that RM was not a full-time student in 2003, and as such, RM is
not a student within the meaning of section 151(c)(4).
Therefore, petitioner is not entitled to claim RM as a dependent
on his 2003 Federal income tax return.
Accordingly, respondent’s determination, to the extent not
conceded, is sustained.
Head of Household
Petitioner filed as a “head of household” for 2003. In the
notice of deficiency, respondent determined petitioner’s filing
status to be single.
Section 1(b) imposes a special tax rate on individuals
filing as “heads of households”. “Head of household” is defined
in section 2(b) as an unmarried individual who maintained as his
home a household which constitutes for more than one-half of the
taxable year the principal place of abode for specific family
members. See sec. 2(b)(1)(A)(i). A taxpayer is considered to be
maintaining a household only if over half the cost of maintaining
the household during the taxable year is furnished by the
taxpayer. Sec. 2(b).
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Petitioner concedes that RM and JM lived with Ms. Ovalle
during 2003. At trial, petitioner testified that he lived at his
mother’s home. He further testified that he would drop off and
pick up JM from school and that JM would stay with him
“sometimes”. Petitioner is not entitled to “head of household”
filing status since his sons did not live with him for more than
one-half of the year in 2003. Therefore, respondent’s
determination on this issue is sustained.
Earned Income Credit
Petitioner claimed the earned income credit for taxable year
2003 for two “qualifying children”, RM and JM. Respondent
determined that petitioner is not entitled to the earned income
credit for 2003.
Section 32(a)(1) allows an eligible individual an earned
income credit against the individual’s income tax liability.
Section 32(a)(2) limits the credit allowed, and section 32(b)
prescribes different percentages and amounts used to calculate
the credit based on whether the eligible individual has no
qualifying children, one qualifying child, or two or more
qualifying children.
To be eligible to claim an earned income credit with respect
to a qualifying child, a taxpayer must establish, inter alia,
that the child bears a relationship to the taxpayer prescribed by
section 32(c)(3)(B), that the child meets the age requirements of
section 32(c)(3)(C), and that the child shares the same principal
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place of abode as the taxpayer for more than one-half of the
taxable year as prescribed by section 32(c)(3)(A)(ii).
Petitioner conceded that RM and JM lived with Ms. Ovalle
during 2003. Therefore, they fail to meet the residence
requirement under section 32(c)(3)(A)(ii) and are not qualifying
children for purposes of claiming the earned income credit.
Although petitioner is not eligible to claim an earned
income credit under section 32(c)(1)(A)(i) for a qualifying
child, he may be an “eligible individual” under section
32(c)(1)(A)(ii) even if he does not have any qualifying children.
For 2003, a taxpayer is eligible under this subsection only if
his adjusted gross income was less than $11,230. Rev. Proc.
2002-70, 2002-2 C.B. 845. Petitioner’s adjusted gross income was
$12,472.
Accordingly, petitioner is not eligible for an earned income
credit. Respondent’s determination on this issue is sustained.
Additional Child Tax Credit
For 2003, petitioner did not claim a child tax credit, but
he claimed an “additional child tax credit” of $126 with JM as
the qualifying child. Respondent determined that petitioner is
not entitled to an additional child tax credit for 2003.
Section 24(a) authorizes a child tax credit with respect to
each qualifying child of the taxpayer. The term “qualifying
child” is defined in section 24(c). A “qualifying child” means
an individual with respect to whom the taxpayer is allowed a
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deduction under section 151, who has not attained the age of 17
as of the close of the taxable year and who bears a relationship
to the taxpayer as prescribed by section 32(c)(3)(B). Sec.
24(c)(1).
The child tax credit is a nonrefundable personal credit that
was added to the Internal Revenue Code by the Taxpayer Relief Act
of 1997, Pub. L. 105-34, sec. 101(a), 111 Stat. 796, with a
provision for a refundable credit, the “additional child tax
credit”, for families with three or more children. For taxable
years beginning after December 31, 2000, the additional child tax
credit provision was amended to remove the restriction that only
families with three or more children are entitled to claim the
credit. See sec. 24(d)(1); Economic Growth and Tax Relief
Reconciliation Act of 2001, Pub. L. 107-16, sec. 201(c)(1), 115
Stat. 46.
In the absence of other nonrefundable personal credits, a
taxpayer is allowed to claim a child tax credit in an amount that
is the lesser of the full child tax credit or the taxpayer’s
Federal income tax liability for the taxable year. See sec.
26(a).
If the child tax credit exceeds the taxpayer’s Federal
income tax liability for the taxable year, a portion of the child
tax credit may be refundable as an “additional child tax credit”
under section 24(d)(1). For 2003, the additional child tax
credit is allowed in an amount that is the lesser of the
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remaining child tax credit available or 10 percent of the amount
by which the taxpayer’s earned income exceeds $10,500. Sec.
24(d)(1)(A) and (B), (d)(3); Rev. Proc. 2002-70, sec. 3.04, 2002-
2 C.B. at 847. The refundable and nonrefundable portions of the
child tax credit cannot exceed the total allowable amount of the
credit.
At trial, respondent conceded that petitioner was allowed to
claim a dependency exemption deduction with respect to JM for
2003. JM attained the age of 10 in 2003 and is petitioner’s son.
Therefore, JM is a qualifying child within the meaning of section
24(c), which entitles petitioner to claim a child tax credit.
For 2003, the child tax credit is $1,000 per qualifying
child. Sec. 24(a)(2); Jobs and Growth Tax Relief Reconciliation
Act of 2003, Pub. L. 108-27, sec. 101(a), 117 Stat. 753.
Petitioner’s Federal tax liability for 2003 is $161. This is
based on the Court’s finding that petitioner: (1) Has adjusted
gross income of $12,472; (2) is entitled to exemptions of $6,100
for himself and his dependent JM; and (3) is entitled to a
standard deduction of $4,750 for “single” filing status.
Petitioner’s taxable income is $1,622 ($12,472 - $6,100 - $4,750
= $1,622). Petitioner is allowed to claim a child tax credit in
the amount of $161, equal to the amount of his Federal income tax
liability for 2003.
Since petitioner’s child tax credit exceeds his Federal
income tax liability for 2003, he is entitled to a refundable
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additional child tax credit in an amount that is the lesser of
the remaining child tax credit available, or 10 percent of the
amount by which the taxpayer’s earned income exceeds $10,500.
Therefore, petitioner is entitled to claim the lesser of $839
($1,000 - $161) or $197.20 ($12,472 - $10,500 = $1,972 x .10 =
$197.20).
The Court finds that petitioner is entitled to a child tax
credit of $161 and an additional child tax credit of $197.20.
Reviewed and adopted as the report of the Small Tax Case
Division.
To reflect the foregoing,
Decision will be entered
under Rule 155.