T.C. Memo. 2010-121
UNITED STATES TAX COURT
VIRGINIA BOBO, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 2809-09. Filed June 2, 2010.
Virginia Bobo, pro se.
Marshall R. Jones and John W. Sheffield, III, for
respondent.
MEMORANDUM FINDINGS OF FACT AND OPINION
THORNTON, Judge: Respondent determined a $4,408 deficiency
in petitioner’s 2007 Federal income tax. The issues for decision
are: (1) Whether petitioner is entitled to a dependency
exemption deduction for her niece; and (2) whether petitioner is
entitled to an earned income credit with respect to her niece and
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her sister. Unless otherwise indicated, section references are
to the Internal Revenue Code in effect for the year in issue, and
Rule references are to the Tax Court Rules of Practice and
Procedure.
FINDINGS OF FACT
When she filed her petition, petitioner resided in Alabama.
Throughout 2007 petitioner lived in her house with her 20-
year-old niece and her 54-year-old sister. Petitioner’s niece
was a full-time student until she graduated from high school on
May 19, 2007. The niece worked part-time jobs, earning $6,000 to
$7,000 in 2007. Petitioner’s sister was permanently and totally
disabled from various ailments, including congestive heart
failure. During 2007 the sister received Supplemental Security
Income disability payments of $623 per month.
During 2007 petitioner earned wages of $18,454, which she
used to support herself, her niece, and her sister. Petitioner
provided her niece food and shelter and, in addition, paid for
her school supplies, clothing, and medical bills, which totaled
about $800 in 2007. Petitioner’s grown son gave petitioner money
weekly or semiweekly, generally $50 to $150, to help support her
niece and her sister.
On her 2007 Federal income tax return, petitioner claimed
dependency exemption deductions for her niece and her sister.
She also claimed an earned income credit on the basis of having
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two qualifying children; namely, her niece and her sister. By
notice of deficiency respondent disallowed the dependency
exemption deduction as to petitioner’s niece.1 As explanation
for disallowing this deduction, the notice of deficiency states
that the niece had “gross income equal to or greater than the
exemption amount” and “was not a member of your household for the
entire tax year”. In the notice of deficiency respondent also
disallowed the earned income credit on the ground that petitioner
had no qualifying child.
OPINION
The taxpayer generally bears the burden of proving that the
Commissioner’s determinations are in error. Rule 142(a)(1). If
the taxpayer introduces credible evidence with respect to
relevant factual issues and meets other requirements, the burden
as to those factual issues may shift to the Commissioner. Sec.
7491(a). In addition, the Commissioner bears the burden of proof
as to any “new matter, increases in deficiency, and affirmative
defenses, pleaded in the answer”. Rule 142(a)(1). If the
Commissioner, attempting to sustain a deficiency, advances a new
theory that either alters the original deficiency or requires
1
The notice of deficiency did not disallow the dependency
exemption deduction that petitioner claimed for her sister.
Although in this proceeding respondent seems to suggest that this
dependency exemption deduction should be disallowed, he has not
asserted any increased deficiency with respect to this matter.
Consequently, we need not consider this issue further.
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presentation of different evidence, the Commissioner bears the
burden of proof as to this new matter. Shea v. Commissioner, 112
T.C. 183, 191 (1999); Wayne Bolt & Nut Co. v. Commissioner, 93
T.C. 500, 507 (1989).
I. Dependency Exemption Deduction
A taxpayer may claim a dependency exemption deduction with
respect to an individual who is either a “qualifying child” or a
“qualifying relative”. Secs. 151(c), 152(a). To be a taxpayer’s
“qualifying child”, an individual must: (A) Bear a qualifying
relationship to the taxpayer; (B) have the same principal place
of abode as the taxpayer for more than one-half of the taxable
year; (C) meet certain age requirements; and (D) have not
provided over one-half of his or her own support for the year.2
Sec. 152(c)(1).
There is no dispute that petitioner’s niece satisfies the
relationship requirement to be a “qualifying child”. See sec.
152(c)(2)(B). In addition, because petitioner’s niece was not
yet 24 at the close of 2007 and was a full-time high school
student during each of 5 months during 2007, she meets the age
2
To be a taxpayer’s “qualifying relative”, the individual
must: (A) Bear a qualifying relationship (defined more broadly
than for a qualifying child) to the taxpayer; (B) have gross
income for the year less than the exemption amount; (C) have had
more than one-half of his or her support for the year provided by
the taxpayer; and (D) not be a qualifying child of the taxpayer
or any other taxpayer for the year. Sec. 152(d)(1). For 2007
the exemption amount was $3,400. See Rev. Proc. 2006-53, sec.
3.18(1), 2006-2 C.B. 996, 1001.
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requirements. See sec. 152(c)(3)(A)(ii), (f)(2)(A). In
disallowing petitioner’s dependency exemption deduction for her
niece, respondent determined in the notice of deficiency that
petitioner and her niece did not have the same principal place of
abode for more than one-half of 2007.3 On the basis of the
undisputed evidence, however, we have found that petitioner and
her niece lived together in petitioner’s home throughout 2007.
Respondent seems to suggest that we should sustain his
determination because petitioner’s niece provided over one-half
of her own support for 2007. Respondent failed to raise this
theory in the notice of deficiency. Because the factual basis
required to establish whether petitioner’s niece meets this
support test is different from the factual basis required to
establish whether the abode test is met, we treat it as a new
matter. See Shea v. Commissioner, supra at 192. Accordingly, the
burden of proof is on respondent to show that petitioner’s niece
provided more than one-half of her own support for 2007.
The term “support” includes items such as food, shelter,
clothing, medical and dental care, education, and the like. Sec.
3
The notice of deficiency also appears to conclude that
petitioner’s niece was not a “qualifying relative” on the ground
that her gross income exceeded the exemption amount. Because we
conclude that the niece was petitioner’s qualifying child, it is
immaterial whether she also met the requirements for a qualifying
relative. Indeed, an individual who is the taxpayer’s qualifying
child cannot also be the taxpayer’s qualifying relative. Sec.
152(d)(1)(D).
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1.152-1(a)(2)(i), Income Tax Regs. In order to determine whether
an individual provided more than one-half of his or her own
support, it is necessary to compare the amount of support the
individual provided for himself or herself to the amount of
support the individual received from all sources. Cf. id.
(employing a similar test to determine whether an individual
received more than one-half of his or her support from a
taxpayer).
Petitioner testified that during 2007 her niece earned “six
or seven thousand” dollars. Respondent has presented no evidence
to show that during 2007 petitioner’s niece provided herself any
greater amount of support than this or that this amount
represents more than one-half of the total support that she
received from all sources, including petitioner and petitioner’s
son. Accordingly, we hold that respondent has failed to meet his
burden of proof as to this issue and that petitioner is entitled
to a dependency exemption deduction with respect to her niece, as
her qualifying child, for 2007.
II. Earned Income Credit
An eligible individual may claim an earned income credit
against income tax liability. Sec. 32(a). The term “eligible
individual” includes “any individual who has a qualifying child
for the taxable year”. Sec. 32(c)(1)(A)(i). A taxpayer’s
eligibility for, and the amount of, the earned income credit is
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affected by the number of the taxpayer’s qualifying children.
See sec. 32(a), (b), and (c). For this purpose, the definition
of “qualifying child” is the same as under section 152(c), as
pertains to the dependency exemption, except that the
determination is made without regard to whether the individual
provided over one-half of his or her own support. See sec.
32(c)(3).
We have held that petitioner’s niece was her qualifying
child for 2007. In addition, we conclude that petitioner’s
sister was also petitioner’s “qualifying child” under section
32(c)(3). A sister satisfies the relationship requirement. See
sec. 152(c)(2)(B). Moreover, petitioner and her sister had the
same principal place of abode throughout 2007. That leaves just
the age requirement.
The age requirement for a qualifying child is treated as met
with respect to an individual who is permanently and totally
disabled. Sec. 152(c)(3)(B). An individual is permanently and
totally disabled if at any time during the calendar year he or
she is unable to engage in any substantial gainful activity by
reason of any medically determinable physical or mental
impairment which has lasted or can be expected to last for a
continuous period of not less than 12 months. Secs.
152(c)(3)(B), 22(e)(3). On the basis of the undisputed evidence
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in the record, we have found that petitioner’s sister was totally
and permanently disabled throughout 2007.
We conclude and hold that petitioner is entitled to an
earned income tax credit on the basis of having two qualifying
children.
To reflect the foregoing,
Decision will be entered
for petitioner.