T.C. Summary Opinion 2010-60
UNITED STATES TAX COURT
GABRIEL MORA AND MIRNA SILVERIO, Petitioners v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 6732-07S. Filed May 10, 2010.
Gabriel Mora and Mirna Silverio, pro sese.
Anne M. Craig, for respondent.
ARMEN, 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.1 Pursuant to section
7463(b), the decision to be entered is not reviewable by any
1
Unless otherwise indicated, all 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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other court, and this opinion shall not be treated as precedent
for any other case.
Respondent determined a deficiency in petitioners’ 2004
Federal income tax of $5,958, an addition to tax of $307.05 under
section 6651(a)(1) for failure to timely file a tax return, and
an accuracy-related penalty of $1,191.60 under section 6662(a).
In an affirmative pleading, respondent asserts that petitioners
are not entitled to the filing status of married filing jointly
for 2004.
After concessions, the issues for decision are:
(1) Whether petitioners are entitled to the filing status
of married filing jointly;
(2) whether petitioners are entitled to dependency
exemption deductions for petitioner Mora’s two parents, two
nieces, and nephew;
(3) whether petitioners are entitled to the child tax
credit and additional child tax credit for the two nieces and
nephew;
(4) whether petitioners are liable for the addition to tax
for failure to timely file; and
(5) whether petitioners are liable for the accuracy-related
penalty.
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Background
None of the facts have been stipulated by the parties.
Petitioners resided in the State of Florida when the petition was
filed. Petitioners have limited English proficiency, and their
testimony was given through an interpreter at trial. References
to petitioner in the singular are to petitioner Gabriel Mora.
At all relevant times petitioners were not married, but
lived together as husband and wife. During 2004 petitioner
worked for a landscaping company, but petitioner Silverio did not
work outside the home and had no income. Petitioners have a
daughter, S.M., who lived with them and was a minor in 2004.2
During 2004 petitioner wired approximately $1,900 to family
members in Mexico.3 Petitioner sent the money to help support
his parents, two nieces, and nephew, who resided together on a
farm in Mexico. The nieces and nephew were between the ages of
10 and 13 during the year in issue.
Petitioners’ 2004 Federal income tax return was completed by
a professional tax return preparer and untimely filed in June
2005. The return is dated May 27, 2005, and was received by
respondent on June 20, 2005. Petitioners filed the return using
2
It is the policy of the Court to refer to minors only by
their initials. See Rule 27(a)(3).
3
The record includes receipts for six wire transactions
totaling $1,897. Petitioner indicated that he was unable to
locate receipts for all of the wire transactions for 2004.
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the filing status of married filing jointly and claimed six
dependency exemption deductions: one for their daughter and five
for petitioner’s relatives in Mexico (two parents, two nieces,
and a nephew). Petitioners also claimed the child tax credit and
the additional child tax credit for four children: their
daughter and petitioner’s two nieces and nephew.
In a notice of deficiency, respondent denied the dependency
exemption deductions for petitioner’s parents, nieces, and nephew
and denied the child tax credit and additional child tax credit
for petitioner’s nieces and nephew. Respondent also determined
that petitioners are liable for the addition to tax for failure
to timely file a tax return and the accuracy-related penalty
based on negligence or disregard of rules or regulations.
In respondent’s Amendment to Answer respondent alleges that
petitioners were not entitled to file a joint return because
petitioners were not married in 2004, but concedes that
petitioner is entitled to head-of-household filing status and two
exemption deductions: one for petitioner Silverio and one for
petitioner’s daughter, S.M.4
4
Petitioner is also entitled to the child tax credit for
his daughter.
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Discussion
A. Burden of Proof
Generally, the Commissioner’s determinations are presumed
correct, and the taxpayer bears the burden of proving that those
determinations are erroneous. Rule 142(a); Welch v. Helvering,
290 U.S. 111, 115 (1933). Deductions and credits are a matter of
legislative grace, and the taxpayer bears the burden of proof to
establish that he or she is entitled to any deduction or credit
claimed. Rule 142(a); Deputy v. du Pont, 308 U.S. 488, 493
(1940); New Colonial Ice Co. v. Helvering, 292 U.S. 435, 440
(1934). Under section 7491(a)(1), the burden of proof may shift
from the taxpayer to the Commissioner if the taxpayer produces
credible evidence with respect to any factual issue relevant to
ascertaining the taxpayer’s liability. Petitioners have not
alleged that section 7491 applies, nor did they introduce the
requisite evidence to invoke that section; therefore, the burden
of proof remains on petitioners.
B. Filing Status
Pursuant to section 6013, a husband and wife may generally
file a joint Federal income tax return. Married individuals, as
defined in section 7703, who elect to file a joint return under
section 6013 are eligible for the filing status of married filing
jointly. Sec. 1(a)(1). The determination of whether an
individual is married shall be made as of the close of the
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taxable year. Sec. 7703(a)(1). Whether a taxpayer is married
for Federal income tax purposes is determined by reference to the
laws of the State of the taxpayer’s marital domicile. See
Sullivan v. Commissioner, 256 F.2d 664 (4th Cir. 1958), affg. 29
T.C. 71 (1957); Dunn v. Commissioner, 70 T.C. 361, 366 (1978),
affd. without published opinion 601 F.2d 599 (7th Cir. 1979); Lee
v. Commissioner, 64 T.C. 552, 556-559 (1975), affd. 550 F.2d 1201
(9th Cir. 1977).
Petitioners admit that they were not married at the close of
2004. In addition, Florida State law does not recognize common
law marriage. Fla. Stat. Ann. sec. 741.211 (West 2005).
In view of the foregoing, we hold that petitioners are not
entitled to married filing jointly filing status for 2004.
Accordingly, and as allowed by respondent, petitioner shall be
given head-of-household filing status.5
5
As petitioner Silverio had no income in 2004 she has no
tax liability for that year; however, by virtue of sec.
6211(b)(4)(B) there is a deficiency in her income tax for 2004
equal to the disallowed additional child tax credit. As
petitioner is likewise liable for the disallowed additional child
tax credit, respondent concedes that such amount will be
collected only once.
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C. Dependency Exemption Deductions6
Petitioner claims that he is entitled to dependency
exemption deductions for his parents, two nieces, and nephew, who
lived in Mexico throughout 2004.
A taxpayer may be entitled to claim a dependency exemption
deduction for each individual who qualifies as the taxpayer’s
dependent under sections 151 and 152. Secs. 151(a), (c), 152.
As relevant herein, an individual must meet the following tests
in order to qualify as a dependent of the taxpayer: (1) Gross
income test; (2) support test; (3) relationship test; and (4)
citizenship or residency test. Secs. 151 and 152.
A taxpayer is entitled to a dependency exemption deduction
for each dependent, as defined in section 152, whose gross income
for the taxable year is less than the exemption amount. Sec.
151(c)(1)(A). The exemption amount for 2004 was $3,100. Sec.
151(d)(1), (4); Rev. Proc. 2003-85, sec. 3.16, 2003-2 C.B. 1184,
1188. Section 152(a) provides that the term “dependent” means an
individual over half of whose support for the year was received
from the taxpayer. “Dependent” may include a taxpayer’s parent
or niece or nephew. Sec. 152(a)(4), (6). A “dependent” must be
a U.S. citizen or national, or resident of the United States,
6
We note that the Working Families Tax Relief Act of 2004,
Pub. L. 108-311, 118 Stat. 1166, amended, inter alia, secs. 151,
152, 24(c), and 2(b)(1)(A)(i) effective for tax years beginning
after Dec. 31, 2004. Thus, we apply the law as it was applicable
to tax year 2004, i.e., as it existed prior to such amendment.
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Canada, or Mexico at some time during the calendar year in which
the taxable year of the taxpayer begins. Sec. 152(b)(3); sec.
1.152-2(a)(1), Income Tax Regs.
In order to prove that a taxpayer provided more than half of
the support for his dependents, the taxpayer must establish the
entire amount expended for their support from all sources.
Archer v. Commissioner, 73 T.C. 963, 967 (1980); Blanco v.
Commissioner, 56 T.C. 512, 514-515 (1971). In addition, the
taxpayer must demonstrate that the dependents’ gross income did
not exceed the exemption amount. Sec. 151(c)(1)(A), (d)(1), (4).
The record in the present case is devoid of evidence
regarding either the total amount spent for the support of
petitioner’s parents, nieces, and nephew (by petitioner and from
other sources) or the gross income of petitioner’s parents in
2004. Thus, although petitioner’s parents, nieces, and nephew
satisfy the relationship and residency tests, petitioner has not
proven either that he satisfies the support test or that his
parents satisfy the gross income test.
We commend petitioner for contributing to the support of his
relatives in Mexico. However, he has not shown either the extent
of such support or the gross income of his parents. Accordingly,
we hold that petitioner is not entitled to dependency exemption
deductions for his parents, nieces, and nephew for 2004.
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D. Child Tax Credit and Additional Child Tax Credit
Section 24(a) allows taxpayers a credit against tax imposed
for each qualifying child. Section 24(c)(1)(A) provides that a
“qualifying child” for purposes of section 24 is any individual
if “the taxpayer is allowed a deduction under section 151 with
respect to such individual for the taxable year”. Section 24(d)
provides that a portion of the credit may be refundable, which
portion is commonly referred to as the additional child tax
credit.
Because petitioner is not entitled to dependency exemption
deductions for his two nieces and nephew under section 151, he is
not entitled to a child tax credit or additional child tax credit
for them under section 24.
E. Addition to Tax for Failure To File
Section 6651(a)(1) imposes an addition to tax for failure to
file a return by its due date. The addition equals 5 percent of
the tax required to be shown on the return for each month or
fraction thereof that the return is late, not to exceed 25
percent. Sec. 6651(a)(1), (b)(1).
Section 7491(c) generally provides that the Commissioner
bears the burden of production with respect to the liability of
an individual for any penalty or addition to tax. The
Commissioner may meet his burden of production by coming forward
with sufficient evidence indicating that it is appropriate to
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impose the relevant penalty or addition to tax. Higbee v.
Commissioner, 116 T.C. 438, 446 (2001). Respondent has met his
burden of production.
In the absence of an extension, the last date for petitioner
to have timely filed a 2004 Federal income tax return was Friday,
April 15, 2005. See sec. 6072(a). Petitioner’s 2004 Federal
income tax return was dated May 27, 2005, and was not received by
respondent until June 20, 2005.
“A failure to file a tax return on the date prescribed leads
to a mandatory penalty unless the taxpayer shows that such
failure was due to reasonable cause and not due to willful
neglect.” McMahan v. Commissioner, 114 F.3d 366, 368 (2d Cir.
1997), affg. T.C. Memo. 1995-547. A showing of reasonable cause
requires a taxpayer to show that he exercised “ordinary business
care and prudence” but was nevertheless unable to file the return
within the prescribed time. United States v. Boyle, 469 U.S.
241, 246 (1985); sec. 301.6651-1(c)(1), Proced. & Admin. Regs.
Petitioner has not offered any evidence to establish that
the late filing was due to reasonable cause and not due to
willful neglect. See sec. 6651(a)(1). Accordingly, we hold that
petitioner is liable for the addition to tax under section
6651(a).
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F. Section 6662 Penalty
Section 6662(a) and (b)(1) imposes a penalty equal to 20
percent of the amount of any underpayment attributable to
negligence or disregard of rules or regulations. The term
“negligence” includes any failure to make a reasonable attempt to
comply with tax laws, and “disregard” includes any careless,
reckless, or intentional disregard of rules or regulations. Sec.
6662(c). The Commissioner bears the burden of production with
respect to the accuracy-related penalty. See sec. 7491(c);
Higbee v. Commissioner, supra.
Section 6664(c)(1) provides an exception to the imposition
of the accuracy-related penalty if the taxpayer establishes that
there was reasonable cause for, and the taxpayer acted in good
faith with respect to, the underpayment. Sec. 1.6664-4(a),
Income Tax Regs. The determination of whether the taxpayer acted
with reasonable cause and in good faith is made on a case-by-case
basis, taking into account the pertinent facts and circumstances.
Sec. 1.6664-4(b)(1), Income Tax Regs.
Circumstances that may indicate reasonable cause and good
faith include the extent of the taxpayer’s effort to properly
assess the tax liability and an honest misunderstanding of fact
or law that is reasonable in light of the taxpayers’s experience,
knowledge, and education. Id. Reliance on the advice of a
professional tax adviser does not necessarily demonstrate
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reasonable cause and good faith; however, professional advice
constitutes reasonable cause and good faith if, under all the
circumstances, such reliance was reasonable and the taxpayer
acted in good faith. Id.
The taxpayer bears the burden of proving that he or she did
not act negligently or disregard rules or regulations. Rule
142(a); Welch v. Helvering, 290 U.S. at 115; Higbee v.
Commissioner, supra at 447; see sec. 7491(c) (regarding the
Commissioner’s burden of production).
We are satisfied that petitioner, whose command of the
English language is limited at best, made a good faith effort to
properly determine his 2004 Federal income tax liability and that
his underpayment results from reliance on the advice of a
professional tax adviser combined with an honest misunderstanding
of fact or law that is reasonable in light of his experience,
knowledge, and education. Accordingly, we hold that petitioner
is not liable for the section 6662(a) accuracy-related penalty
for 2004.
Conclusion
We have considered all of the arguments made by petitioners,
and, to the extent that we have not specifically addressed those
arguments, we conclude that the arguments do not support a result
contrary to those reached herein.
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To reflect the foregoing,
Decision will be entered
under Rule 155.