T.C. Summary Opinion 2006-105
UNITED STATES TAX COURT
DARREN M. PARKER, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 2611-05S. Filed July 13, 2006.
Darren M. Parker, 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 $4,962. The issues for decision are
whether petitioner: (1) Is entitled to dependency exemption
deductions, (2) is entitled to an earned income credit, and (3)
is entitled to a child tax credit and 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 Miami, Florida.
Petitioner has one son, DP. Petitioner also has one
“daughter”, EW, who is not biologically related to him, but he
has treated EW like his own daughter since her birth.
During 2003, petitioner was employed as an insulator by
Fence Masters. Petitioner filed a Form 1040A, U.S. Individual
Income Tax Return, for 2003, reporting wages of $13,871,
unemployment compensation of $1,791, and adjusted gross income of
$15,662.
Respondent issued to petitioner a statutory notice of
deficiency determining petitioner was not entitled to dependency
exemption deductions, an earned income credit, a child tax credit
or an additional child tax credit, because he failed to
substantiate his claims.
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Discussion
The Commissioner’s determinations are presumed correct, and
generally taxpayers bear the burden of proving otherwise.1 Rule
142(a)(1); Welch v. Helvering, 290 U.S. 111, 115 (1933).
Dependency Exemption
Respondent disallowed the dependency exemption deductions
that petitioner claimed for DP and EW on his 2003 return.
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
increased to 24 if the child was a student as defined by section
151(c)(4). Sec. 151(c)(1)(B).
Section 151(c)(1) also allows a taxpayer to claim an
exemption deduction for an individual whose 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 of whose
1
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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support for the taxable year was received from the taxpayer.
Secs. 151(c)(1)(A), 152(a)(9).
Petitioner has not offered any substantiation to show that
he provided more than half of DP’s and EW’s support during 2003.
Therefore, petitioner is not entitled to claim DP or EW as
dependents on his 2003 Federal income tax return.
Accordingly, respondent’s determination is sustained.
Earned Income Credit
Respondent determined that petitioner is not entitled to an
earned income credit for DP and EW, because he failed to
substantiate that DP and EW are “qualifying children”.
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).
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Petitioner testified that, in 2003, DP and EW spent weekends
and summer vacation with him. This amounts to less than one-half
of the taxable year. Therefore, DP and EW 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 section only if his
adjusted gross income was less than $11,230. Rev. Proc. 2002-70,
sec. 3.06, 2002-2 C.B. 845, 847. Petitioner’s adjusted gross
income was $15,662.
Accordingly, petitioner is not eligible for an earned income
credit. Respondent’s determination on this issue is sustained.
Child Tax Credit and Additional Child Tax Credit
For 2003, petitioner claimed a child tax credit of $176 and
an additional child tax credit of $337 with DP and EW as the
qualifying children. Respondent determined that petitioner is
not entitled to either credit.
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
DP and EW as dependents under section 151, they are not
qualifying children. 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).
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
for respondent.