T.C. Summary Opinion 2009-188
UNITED STATES TAX COURT
AARON LEE HILL, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 28057-08S. Filed December 10, 2009.
Aaron Lee Hill, pro se.
Nicholas Doukas, for respondent.
PANUTHOS, Chief Special Trial Judge: This case was heard
pursuant to the provisions of section 7463 of the Internal
Revenue Code in effect when the petition was filed. Pursuant to
section 7463(b), the decision to be entered is not reviewable by
any other court, and this opinion shall not be treated as
precedent for any other case. Unless otherwise indicated,
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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.
Respondent determined a $5,840 deficiency in petitioner’s
2007 Federal income tax. The issues for decision are whether
petitioner: (1) Is entitled to dependency exemption deductions
for his niece and nephew; (2) qualifies as a head of household;
(3) is entitled to child tax credits; and (4) is entitled to an
earned income credit (EIC).
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. At the time the petition
was filed, petitioner resided in California.
A.M.1 is the son of Demetria L. Hill (Ms. Hill) and was 9
years old in 2007. S.M. is the daughter of Ms. Hill, and was 1
year old in 2007. Petitioner is the brother of Ms. Hill, and
A.M. and S.M. are his nephew and niece, respectively.
Ms. Hill has four children and, at some time before the
beginning of 2007, experienced difficulty in providing for her
children. Ms. Hill was unable to provide a home for her children
and, in fact, was living with a friend during 2007. Ms. Hill and
1
The Court refers to minor children by their initials. Rule
27(a)(3).
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petitioner agreed that two of her children would live with Ms.
Hill at her friend’s home, and A.M. and S.M. would live with
petitioner. This arrangement began before 2007 and continued
throughout the year.
Petitioner was living with a female domestic partner during
2007, and the couple cared for A.M. and S.M. insofar as providing
lodging, childcare, most evening meals, and transportation to and
from school. For 2007 petitioner reported approximately $17,000
in total income. Petitioner’s domestic partner earned
approximately $100,000 in 2007.
During weekdays petitioner’s mother provided childcare for
S.M. while A.M. attended school and had breakfast and lunch
provided by the school. Petitioner’s mother also provided
childcare for A.M. and Ms. Hill’s other two children after
school. Petitioner’s mother’s address was used for the children
so they could all attend the same school and so that they could
all stay together for some time after school. At the end of the
day petitioner picked up A.M. and S.M. and brought them to his
home. Petitioner’s mother delivered the other two children to
Ms. Hill.
Petitioner paid his mother approximately $400 per month for
childcare for A.M. and S.M. Petitioner also paid approximately
$400 per month to his domestic partner for the costs of
maintaining the home. Additionally, petitioner spent
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approximately $200 in groceries per month for A.M. and S.M.
There is no evidence that A.M.’s and S.M.’s mother or any other
persons provided support for the children.
In early 2008 petitioner prepared his 2007 tax return using
a computer program. On the return he reported head of household
status, claimed dependency exemption deductions, the EIC, and
child tax credits with respect to A.M. and S.M. and claimed a
refund of $5,678.
As indicated, on September 2, 2008, respondent issued a
notice of deficiency determining a deficiency of $5,840. Only
the face page and the waiver page of the notice of deficiency
were included in the record. It appears respondent’s adjustment
reflects a single filing status with no dependents and further,
that petitioner is ineligible for the claimed dependency
exemption deductions, the EIC, and child tax credits.2
Discussion
In general, the Commissioner’s determinations set forth in a
notice of deficiency are presumed correct, and the taxpayer bears
the burden of showing that the determinations are in error. Rule
142(a); Welch v. Helvering, 290 U.S. 111, 115 (1933). Deductions
2
Petitioner’s income, without claiming the dependency
exemption deductions, would make him ineligible for the EIC.
Changing his filing status and disallowing the deductions and
credits would show petitioner owing a tax of about $162. This
amount, in addition to the $5,678 refund, results in the
deficiency of $5,840.
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are a matter of legislative grace. Deputy v. du Pont, 308 U.S.
488, 493 (1940); New Colonial Ice Co. v. Helvering, 292 U.S. 435,
440 (1934). A taxpayer bears the burden of proving that the
taxpayer is entitled to any deduction claimed. Rule 142(a);
INDOPCO, Inc. v. Commissioner, 503 U.S. 79, 84 (1992); Welch v.
Helvering, supra; Wilson v. Commissioner, T.C. Memo. 2001-139. A
taxpayer is required to maintain records sufficient to
substantiate deductions claimed on his or her income tax return.
Sec. 6001; sec. 1.6001-1(a), (e), Income Tax Regs. The fact that
a taxpayer reports a deduction on a return is not sufficient to
substantiate the claimed deduction. Wilkinson v. Commissioner,
71 T.C. 633, 639 (1979); Roberts v. Commissioner, 62 T.C. 834,
837 (1974). Rather, an income tax return is merely a statement
of the taxpayer’s claim; it is not presumed to be correct.
Wilkinson v. Commissioner, supra at 639; Roberts v. Commissioner,
supra at 837; see also Seaboard Commercial Corp. v. Commissioner,
28 T.C. 1034, 1051 (1957) (a taxpayer’s income tax return is a
self-serving declaration that may not be accepted as proof for
the claimed deduction or exclusion); Halle v. Commissioner, 7
T.C. 245 (1946) (a taxpayer’s income tax return is not self-
proving as to the truth of its contents), affd. 175 F.2d 500 (2d
Cir. 1949).
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Pursuant to section 7491(a), the burden of proof as to
factual matters shifts to the Commissioner under certain
circumstances. Petitioner has neither alleged that section
7491(a) applies nor established his compliance with the
substantiation and recordkeeping requirements. Sec.
7491(a)(2)(A) and (B). Petitioner therefore bears the burden of
proof. See Rule 142(a).
I. Dependency Exemption Deductions
Section 151 allows a deduction for each individual who
qualifies as a dependent of the taxpayer as defined in section
152. Section 152(a) provides that a dependent means a qualifying
child or a qualifying relative. Section 152(c)(1) defines a
“qualifying child” as an individual:
(A) who bears a relationship to the taxpayer, such as a
descendant of the taxpayer’s brother or sister;
(B) who has the same principal place of abode as the
taxpayer for more than one-half of such taxable year (aside
from special rules applicable to divorced or separated
parents);
(C) who is under the age of 19 or is a student who has
not attained the age of 24 as of the close of the calendar
year and
(D) who has not provided over one-half of such
individual’s own support for the calendar year in which the
taxable year of the taxpayer begins.
Petitioner has produced sufficient evidence to show A.M. and
S.M. meet the requirements of section 152(c)(1)(A) since they are
children of his sister. Petitioner has produced credible
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evidence to show both that the children resided with him for more
than one-half of 2007 and the ages of A.M. and S.M. (1 and 9 in
2007) to meet the requirements of section 152(c)(1)(B) and (C).
The Court is further satisfied that the children, ages 1 and 9,
did not provide more than one-half of their own support in 2007,
and there is no evidence that A.M. and S.M. received any other
support as defined in section 1.152-1(a)(2), Income Tax Regs.
Thus, the children meet the requirement of section 152(c)(1)(D).
Consequently, A.M. and S.M. are “qualifying children” under
section 152(c) and are thus petitioner’s dependents under section
152(a)(1). Consequently, petitioner is entitled to dependency
exemption deductions for the two children.3
II. Head of Household Filing Status
Section 1(b) imposes a special tax rate on an individual
taxpayer who files a Federal income tax return as a head of
household. Section 2(b) defines a head of household as an
individual taxpayer who: (1) Is unmarried as of the close of the
taxable year and is not a surviving spouse; and (2) maintains as
his home a household that constitutes for more than one-half of
the taxable year the principal place of abode, as a member of
3
We recognize that our conclusion suggests a finding that
virtually all of petitioner’s expendable income went to support
the children. We found petitioner’s testimony to be credible,
and we are satisfied that he was committed to caring for his
sister’s children at a time when his sister was unable to care
for them.
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such household, of a dependent for whom the taxpayer is entitled
to a deduction under section 151. See also, e.g., Rowe v.
Commissioner, 128 T.C. 13, 16-17 (2007). The taxpayer is
considered as maintaining a household only if the taxpayer
furnishes over one-half of the cost of maintaining the household.
Sec. 2(b)(1).
In order for the Court to determine whether the taxpayer
provided over one-half of the cost of maintaining the household,
the taxpayer must prove the total cost of maintaining the
household. Costs of maintaining a household include “property
taxes, mortgage interest, rent, utility charges, upkeep and
repairs, property insurance, and food consumed on the premises.”
Sec. 1.2-2(d), Income Tax Regs.
As indicated, petitioner testified that he gave his domestic
partner approximately $400 per month for household expenses and
expended approximately $200 per month on food for the household.
There is no evidence of the total cost of maintaining the
household. Without evidence showing the total cost, the Court
cannot conclude that petitioner has provided more than one-half
of the cost of maintaining the household. Since petitioner has
not provided evidence to show he maintained the household as
defined in the regulations, he is not entitled to head of
household filing status.
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III. Earned Income Credit
An eligible individual is entitled to a credit against his
Federal income tax liability, calculated as a percentage
of his earned income, subject to certain limitations. Sec.
32(a)(1); Rowe v. Commissioner, supra at 15. Different
percentages and amounts are used to calculate the EIC, depending
on whether the eligible individual has no qualifying children,
one qualifying child, or two or more qualifying children. Sec.
32(b); Rowe v. Commissioner, supra at 15. A “qualifying child”
means a qualifying child of the taxpayer as defined in section
152(c). Sec. 32(c)(3)(A).
As previously discussed, A.M. and S.M. are petitioner’s
qualifying children; thus, petitioner is entitled to the EIC for
2007 with two qualifying children.
IV. Child Tax Credits
Section 24(a) provides a credit with respect to each
qualifying child of the taxpayer. Section 24(c)(1) defines the
term “qualifying child” as “a qualifying child of the taxpayer
(as defined in section 152(c)) who has not attained age 17.”4
The child tax credit may not exceed the taxpayer’s regular
tax liability. Sec. 24(b)(3). Where a taxpayer is eligible for
4
The credit is reduced by $50 for each $1,000 (or fraction
thereof) by which an individual’s modified adjusted gross income
exceeds $110,000 in the case of a joint return, $75,000 in the
case of an unmarried individual, and $55,000 in the case of a
married individual filing a separate return. Sec. 24(b).
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the child tax credit but the taxpayer’s regular tax liability is
less than the amount of the child tax credit potentially
available under section 24(a), section 24(d) makes a portion of
the credit, known as the additional child tax credit, refundable.
Since A.M. and S.M. are qualifying children and as noted
above were below the age 17 in 2007, petitioner is entitled to
the child tax credit and the additional child tax credit.
To reflect the foregoing,
Decision will be entered
under Rule 155.