T.C. Summary Opinion 2006-80
UNITED STATES TAX COURT
JOSEPH ORLANDO BECKFORD, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 906-05S. Filed May 16, 2006.
Joseph Orlando Beckford, pro se.
Vivian N. Rodriguez, 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 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 for 2003 a deficiency in petitioner’s
Federal income tax of $2,943. The issues for decision are
whether petitioner is entitled to: (1) A dependency exemption
deduction for his niece, (2) an earned income credit, (3) a child
tax credit, and (4) an additional child tax credit.
Background
The stipulation of facts and exhibits received into evidence
are incorporated herein by reference. At the time the petition
in this case was filed, petitioner resided in Miami, Florida.
During 2003, petitioner was 24 years old. Petitioner lived
in a house with his mother Thelma Blake (Ms. Blake), his brother,
and his niece TW.1 TW is the daughter of petitioner’s sister.
At the time, TW was 7 years old.
Petitioner was employed as a computer repair technician by
Sygnetics, Inc. and Alienware Corp. in 2003. Ms. Blake was
employed in 2003, and she earned approximately $35,000 to $40,000
that year.
Petitioner filed a Form 1040, U.S. Individual Income Tax
Return, for 2003, reporting wages of $11,132 and adjusted gross
income of $11,132. Respondent issued to petitioner a statutory
notice of deficiency determining that petitioner is not entitled
to a dependency exemption deduction for TW, an earned income
1
The Court will refer to the minor child by her initials.
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credit, a child tax credit, or an additional child tax credit,
because he failed to substantiate his claims.
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 a dependency exemption for TW for 2003.
Respondent disallowed the deduction contending that petitioner
has failed to provide any substantiation that he provided more
than half of TW’s support during 2003.
Section 151(c)(1) allows a taxpayer to claim an exemption
deduction for each qualifying dependent. A daughter of a sister
of the taxpayer is considered a “dependent” so long as the
child’s gross income for the calendar year in which the taxable
year of the taxpayer begins is less than the exemption amount,
and more than half the child’s support for the taxable year was
received from the taxpayer. Secs. 151(c)(1)(A), 152(a)(6).
Although petitioner contends that he took care of TW in 2003
and that he provided more than half of TW’s support, he has
failed to offer any records to corroborate his testimony.
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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Petitioner explained that he lacked documentation because he
generally paid TW’s expenses in cash.
Petitioner and Ms. Blake shared the expenses for support of
the household. According to petitioner, he “helped with” paying
the mortgage, the utilities, and “most of everything”. The
record is unclear as to the amount of expenses paid for the
household. It is also unclear how petitioner and Ms. Blake
allocated the expenses between them. It appears that petitioner
contributed to the household expenses whenever he was able and
that he did not pay a set amount to Ms. Blake. The Court is
unable to determine how much of the expenses paid by petitioner
related to TW.
TW attended private school and her tuition was approximately
$287 per month. Ms. Blake testified that both she and petitioner
together paid TW’s tuition. Petitioner, however, failed to offer
any records or receipts from the school to show the amount of
TW’s expenses or how those expenses were paid and allocated.
Ms. Blake, by her own admission, earned about three times as
much as petitioner in 2003. The Court concludes that petitioner
has not offered sufficient evidence to show that he provided more
than half of TW’s support in 2003.
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Earned Income Credit
Respondent disallowed the earned income credit, contending
that petitioner has failed to substantiate that he treated TW as
his own child.
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
place of abode as the taxpayer for more than one-half of the
taxable year as prescribed by section 32(c)(3)(A)(ii).
In order for a niece to meet the relationship requirement of
section 32(c)(3)(B), the taxpayer must show that he cared for the
niece as his own child. Sec. 32(c)(3)(B)(i)(II).
Petitioner has not offered any evidence to show that he
cared for TW as if she were his own daughter. Even if petitioner
did provide some financial support for TW, it is insufficient to
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show that he cared for TW as his own child in 2003. This Court
has indicated that merely contributing financially to the support
of an individual does not rise to the level of caring for the
individual as one’s own child. See Mares v. Commissioner, T.C.
Memo. 2001-216; Smith v. Commissioner, T.C. Memo. 1997-544.
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
$11,132.
Accordingly, petitioner is eligible for an earned income
credit.
Child Tax Credit and Additional Child Tax Credit
For 2003, petitioner claimed a child tax credit of $29 and
an additional child tax credit of $63 with TW as the qualifying
child. Respondent determined that petitioner is not entitled to
either.
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).
Since petitioner is not allowed a deduction with respect to
TW as a dependent under section 151, TW is not qualifying child.
In the absence of a qualifying child in 2003, petitioner is not
entitled to claim a child tax credit.
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).
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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
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.
Petitioner is not entitled to claim an additional child tax
credit because he did not qualify for a child tax credit.
Reviewed and adopted as the report of the Small Tax Case
Division.
To reflect the foregoing,
Decision will be entered
under Rule 155.