T.C. Summary Opinion 2018-31
UNITED STATES TAX COURT
LONNIE D. JOHNSON, JR., Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 11767-16S. Filed June 6, 2018.
Beverly Winstead, Richard Ochran (student), and Jose Montalvo (student),
for petitioner.
Elizabeth M. Shaner, for respondent.
SUMMARY OPINION
ARMEN, Special Trial Judge: This case was heard pursuant to the
provisions of section 7463 of the Internal Revenue Code in effect when the -2-
petition was filed.1 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.
Respondent determined a deficiency in petitioner’s Federal income tax of
$3,362 for 2014. The issues for decision are whether petitioner is entitled to:
(1) dependency exemption deductions for his two children, (2) a child tax credit or
an additional child tax credit, and (3) an earned income tax credit.
Background
Some of the facts have been stipulated, and they are so found. The Court
incorporates by reference the parties’ stipulation of facts and accompanying
exhibits.
Petitioner resided in the State of Maryland when his petition was filed with
the Court.
Petitioner was previously married to Jamene Johnson. The couple had two
children, a son, who was born in 1999, and a daughter, who was born in 2000
(collectively, the children).
1 Unless otherwise indicated, all subsequent section references are to the Internal Revenue Code in effect for the year in issue. All Rule references are to the Tax Court Rules of Practice and Procedure. -3-
Petitioner and Ms. Johnson were divorced in or about 2008. The divorce
proceeding transcript of the Circuit Court for Montgomery County, Maryland
Family Division reflects a support and custody agreement (agreement) that was
entered into freely and voluntarily by petitioner and Ms. Johnson, who each
affirmatively stated to the family court that the agreement was in the children’s
best interest. Insofar as custody was concerned, the agreement called for
petitioner and Ms. Johnson to have joint legal custody of the children, with Ms.
Johnson having sole physical custody but with petitioner having “access to the
children” for one weekend per month, for one month during the summer school
vacation, and on Christmas, New Year’s, and Easter in “odd” years and on
Thanksgiving in “even” years. In addition, the agreement provided that “every
year, the children’s birthday shall be spent with Mom if it’s during school or
during the week. And, if it happens to fall on a weekend, then Dad has a right to
have the children on the children’s birthday.” Finally, the agreement provided that
“Mother’s Day will always be spent with Mom; Father’s Day with Dad.”
At trial petitioner testified that although there were no formal modifications
made to the aforementioned agreement by, or under the auspices of, the
Montgomery County family court, he and Ms. Johnson informally made
“adjustments as needed” between themselves. Petitioner (as well as his son, who -4-
was no longer a minor at the time of trial) testified that the children stayed with
their mother during the school week but that the children otherwise stayed with
petitioner every weekend and holiday and throughout summer vacation. As far as
the school week was concerned, the testimony was that the children were picked
up after school on Friday and dropped off Sunday night. Petitioner acknowledged
that “every once in a while” the children “might go to California for a holiday with
their mother”; that they did see their mother during the summer, although “very
rarely”; and that he had the children for “the majority” of the holidays, and thus
not every holiday, although (according to petitioner) it was “a very rare occasion”
when he did not.
During 2014 Ms. Johnson lived in Gaithersburg, Maryland, where the
children attended public school. During that year petitioner lived in Baltimore,
Maryland.
Petitioner filed a Federal income tax return for 2014. On it he reported
wages of $6,948 and unemployment compensation of $1,824, or total income (as
well as adjusted gross income) of $8,772. Also on his 2014 return petitioner
elected “single” filing status, and he claimed dependency exemption deductions
for the children, an additional child tax credit, and an earned income tax credit. -5-
In support of the latter petitioner attached to his return a Schedule EIC, Earned
Income Credit, on which he represented that the children resided with him for
seven months during the year.
In a notice of deficiency respondent disallowed petitioner’s claimed
dependency exemption deductions, additional child tax credit, and earned income
tax credit, thereby determining the deficiency of $3,362 for 2014 that is at issue in
this case.
Discussion
I. 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
proving that he or she is entitled to any deduction or credit claimed. Deputy v.
du Pont, 308 U.S. 488 (1940). Compare section 7491(a), which does not serve to
effect any burden-shifting in the present case given petitioner’s failure to raise the
matter, much less demonstrate that the prerequisites for the application of the
section have been satisfied. Accordingly, petitioner bears the burden of proof in
this case. -6-
II. Dependency Exemption Deductions
In computing taxable income section 151(c) allows as a deduction an
exemption for each dependent of a taxpayer. Section 152(a) defines “dependent”
to include a “qualifying child”. In order to be a taxpayer’s “qualifying child”, an
individual must: (A) bear a specified 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) satisfy certain age requirements; (D) have not provided more than
one-half of his or her own support for the year; and, if married, (E) have not filed a
joint return (other than only for a claim of refund) with his or her spouse. Sec.
152(c)(1).
Respondent concedes that all but the second of the foregoing requirements
are satisfied in the present case. Thus, the parties’ dispute centers on whether the
children had the same principal place of abode as petitioner for more than one-half
of 2014.
Petitioner contends that the children spent both a majority of hours and a
majority of days with him in 2014. However, the record in this case is much too
wanting to support an analysis by hours, as any such analysis requires supposition
and assumption. Rather, the Court concludes that only an analysis by days is
possible. And at best, given the meager record, any meaningful analysis can be -7-
based only on the number of nights that the children slept in the home of each
parent.2
On brief petitioner posits that the children spent every weekend, every
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T.C. Summary Opinion 2018-31
UNITED STATES TAX COURT
LONNIE D. JOHNSON, JR., Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 11767-16S. Filed June 6, 2018.
Beverly Winstead, Richard Ochran (student), and Jose Montalvo (student),
for petitioner.
Elizabeth M. Shaner, for respondent.
SUMMARY OPINION
ARMEN, Special Trial Judge: This case was heard pursuant to the
provisions of section 7463 of the Internal Revenue Code in effect when the -2-
petition was filed.1 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.
Respondent determined a deficiency in petitioner’s Federal income tax of
$3,362 for 2014. The issues for decision are whether petitioner is entitled to:
(1) dependency exemption deductions for his two children, (2) a child tax credit or
an additional child tax credit, and (3) an earned income tax credit.
Background
Some of the facts have been stipulated, and they are so found. The Court
incorporates by reference the parties’ stipulation of facts and accompanying
exhibits.
Petitioner resided in the State of Maryland when his petition was filed with
the Court.
Petitioner was previously married to Jamene Johnson. The couple had two
children, a son, who was born in 1999, and a daughter, who was born in 2000
(collectively, the children).
1 Unless otherwise indicated, all subsequent section references are to the Internal Revenue Code in effect for the year in issue. All Rule references are to the Tax Court Rules of Practice and Procedure. -3-
Petitioner and Ms. Johnson were divorced in or about 2008. The divorce
proceeding transcript of the Circuit Court for Montgomery County, Maryland
Family Division reflects a support and custody agreement (agreement) that was
entered into freely and voluntarily by petitioner and Ms. Johnson, who each
affirmatively stated to the family court that the agreement was in the children’s
best interest. Insofar as custody was concerned, the agreement called for
petitioner and Ms. Johnson to have joint legal custody of the children, with Ms.
Johnson having sole physical custody but with petitioner having “access to the
children” for one weekend per month, for one month during the summer school
vacation, and on Christmas, New Year’s, and Easter in “odd” years and on
Thanksgiving in “even” years. In addition, the agreement provided that “every
year, the children’s birthday shall be spent with Mom if it’s during school or
during the week. And, if it happens to fall on a weekend, then Dad has a right to
have the children on the children’s birthday.” Finally, the agreement provided that
“Mother’s Day will always be spent with Mom; Father’s Day with Dad.”
At trial petitioner testified that although there were no formal modifications
made to the aforementioned agreement by, or under the auspices of, the
Montgomery County family court, he and Ms. Johnson informally made
“adjustments as needed” between themselves. Petitioner (as well as his son, who -4-
was no longer a minor at the time of trial) testified that the children stayed with
their mother during the school week but that the children otherwise stayed with
petitioner every weekend and holiday and throughout summer vacation. As far as
the school week was concerned, the testimony was that the children were picked
up after school on Friday and dropped off Sunday night. Petitioner acknowledged
that “every once in a while” the children “might go to California for a holiday with
their mother”; that they did see their mother during the summer, although “very
rarely”; and that he had the children for “the majority” of the holidays, and thus
not every holiday, although (according to petitioner) it was “a very rare occasion”
when he did not.
During 2014 Ms. Johnson lived in Gaithersburg, Maryland, where the
children attended public school. During that year petitioner lived in Baltimore,
Maryland.
Petitioner filed a Federal income tax return for 2014. On it he reported
wages of $6,948 and unemployment compensation of $1,824, or total income (as
well as adjusted gross income) of $8,772. Also on his 2014 return petitioner
elected “single” filing status, and he claimed dependency exemption deductions
for the children, an additional child tax credit, and an earned income tax credit. -5-
In support of the latter petitioner attached to his return a Schedule EIC, Earned
Income Credit, on which he represented that the children resided with him for
seven months during the year.
In a notice of deficiency respondent disallowed petitioner’s claimed
dependency exemption deductions, additional child tax credit, and earned income
tax credit, thereby determining the deficiency of $3,362 for 2014 that is at issue in
this case.
Discussion
I. 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
proving that he or she is entitled to any deduction or credit claimed. Deputy v.
du Pont, 308 U.S. 488 (1940). Compare section 7491(a), which does not serve to
effect any burden-shifting in the present case given petitioner’s failure to raise the
matter, much less demonstrate that the prerequisites for the application of the
section have been satisfied. Accordingly, petitioner bears the burden of proof in
this case. -6-
II. Dependency Exemption Deductions
In computing taxable income section 151(c) allows as a deduction an
exemption for each dependent of a taxpayer. Section 152(a) defines “dependent”
to include a “qualifying child”. In order to be a taxpayer’s “qualifying child”, an
individual must: (A) bear a specified 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) satisfy certain age requirements; (D) have not provided more than
one-half of his or her own support for the year; and, if married, (E) have not filed a
joint return (other than only for a claim of refund) with his or her spouse. Sec.
152(c)(1).
Respondent concedes that all but the second of the foregoing requirements
are satisfied in the present case. Thus, the parties’ dispute centers on whether the
children had the same principal place of abode as petitioner for more than one-half
of 2014.
Petitioner contends that the children spent both a majority of hours and a
majority of days with him in 2014. However, the record in this case is much too
wanting to support an analysis by hours, as any such analysis requires supposition
and assumption. Rather, the Court concludes that only an analysis by days is
possible. And at best, given the meager record, any meaningful analysis can be -7-
based only on the number of nights that the children slept in the home of each
parent.2
On brief petitioner posits that the children spent every weekend, every
holiday, and the entire summer break with him and that the children were never
with their mother other than during the school week. This strikes us as
improbable.3 The Court is not bound to accept testimony that is improbable,
unreasonable, or questionable. See Demkowicz v. Commissioner, 551 F.2d 929,
931 (3d Cir. 1977), rev’g T.C. Memo. 1975-278; see also Tokarski v.
Commissioner, 87 T.C. 74, 77 (1986). Nevertheless, the Court will indulge
petitioner and proceed with its analysis generally along the lines he advocates;
however, with respect to school holidays that fell in the middle of the school week,
the Court concludes that it was more likely that the children continued to reside
with their mother in order to more conveniently complete the school week, finding
2 See and compare sec. 1.152-4(d)(1), Income Tax Regs., cited infra pp. 8-9 in the text in the context of the discussion of the special rule for children of divorced or separated parents. As applicable, the regulation provides that the custodial parent is the “parent with whom the child resides for the greater number of nights during the calendar year”. 3 One might wonder why the children, both teenagers in 2014, were so willing to be away from school friends for so much of the time. And one might also wonder about the likelihood of the children, a boy and a girl, being so inseparable that each always slept in the same parent’s home as the other. -8-
it unlikely that they would have traveled to Baltimore to stay with their father for
just one night.
Admittedly the number of nights that the children slept in the home of each
parent cannot be decided with certainty or any degree of incontestable precision
on the limited record in this case. Each party has presented an analysis that, while
favoring the offering party, indicates that the issue is exceptionally close.
Likewise, the Court’s independent analysis underscores the closeness of the issue.
However, after weighing all the available evidence, and keeping in mind that
petitioner does bear the burden of proof, the Court concludes that the children
spent 175 nights at petitioner’s home in 2014, as shown in the appendix at the end
of this opinion. Because 175 nights is less than one-half of the calendar year, it
cannot be said that the children had the same principal place of abode as petitioner
for more than one-half of the taxable year. See sec. 152(c)(1)(B).
However, in the case of divorced or separated parents, section 152(e)
provides a special rule to determine which parent is entitled to a dependency
exemption deduction for a child. Generally, a child who is in the custody of one
or both of the child’s parents for more than one-half of the calendar year and
receives more than one-half of his or her support from parents who are divorced or
separated or who live apart at all times during the last six months of the calendar -9-
year will be considered the qualifying child of the custodial parent. Sec.
152(e)(1). Section 152(e)(4)(A) defines the custodial parent as “the parent having
custody for the greater portion of the calendar year.” As discussed supra, the
regulations similarly provide that the custodial parent is the “parent with whom the
child resides for the greater number of nights during the calendar year”. Sec.
1.152-4(d)(1), Income Tax Regs. According to the regulations, a child is treated
as residing with a parent for a night if: (1) the child sleeps at the residence of the
parent or (2) if the child sleeps in the company of the parent when the child does
not sleep at a parent’s residence. Id. subdiv. (i) and (ii). Section 152(e)(4)(B)
defines the noncustodial parent as “the parent who is not the custodial parent.” As
discussed above, petitioner is the noncustodial parent.
Pursuant to section 152(e), a child will be treated as a qualifying child of the
noncustodial parent rather than of the custodial parent when certain requirements
are satisfied. One of the requirements is that the “custodial parent signs a written
declaration (in such manner and form as the Secretary may by regulations
prescribe) that such custodial parent will not claim such child as a dependent for
any taxable year beginning in such calendar year”. Sec. 152(e)(2)(A).
The declaration required under section 152(e)(2) must be made either on a
completed Form 8332, Release/Revocation of Release of Claim to Exemption for - 10 -
Child by Custodial Parent, or on a statement conforming to the substance of Form
8332. Miller v. Commissioner, 114 T.C. 184, 189 (2000), aff’d sub nom. Lovejoy
v. Commissioner, 293 F.3d 1208 (10th Cir. 2002); sec. 1.152-4(e)(1), Income Tax
Regs. Form 8332 provides an effective and uniform way for a custodial parent to
make the declaration required in section 152(e)(2)(A) for the benefit of the
noncustodial parent. Armstrong v. Commissioner, 139 T.C. 468, 472 (2012),
aff’d, 745 F.3d 890 (8th Cir. 2014).
Petitioner did not obtain a Form 8332, or a similar written statement, from
Ms. Johnson. Without that form, or a similar written statement containing the
information prescribed by section 152(e)(2), the Court is obliged to conclude that
petitioner is not entitled to the dependency exemption deductions pursuant to
section 152(e). See Swint v. Commissioner, 142 T.C. 131, 139 (2014).
On the basis of the foregoing, neither of the children was petitioner’s
qualifying child within the meaning of section 152(c) for 2014, and respondent’s
disallowance of the dependency exemption deductions is therefore sustained.
III. Child Tax Credit and Additional Child Tax Credit
Section 24(a) and (c)(1) provides that a taxpayer is entitled to a child tax
credit with respect to each qualifying child, as defined in section 152(c), who has
not attained age 17. Section 24(d) provides that a portion of the credit, commonly - 11 -
referred to as the additional child tax credit, may be refundable. As we concluded
that the children are not petitioner’s qualifying children as defined in section
152(c) for 2014, it follows as a matter of law that petitioner is not entitled to either
a child tax credit or an additional child tax credit for that year.
IV. Earned Income Tax Credit
Section 32(a)(1) allows an earned income tax credit to an eligible
individual. The term “eligible individual” most commonly means an
individual who has a qualifying child for the taxable year. Sec. 32(c)(1)(A)(i).
For purposes of the earned income tax credit, the term “qualifying child”
generally means a qualifying child as defined in section 152(c). Sec. 32(c)(3).
The Court has already held that the children are not petitioner’s qualifying
children as defined in section 152(c) for the year in issue.
However, an individual who does not have a qualifying child may also be an
eligible individual if certain other requirements are satisfied. Sec. 32(c)(1)(A)(ii).
The earned income tax credit, however, is completely phased out for such a
taxpayer whose earned income equals or exceeds $14,590 for 2014. See Rev.
Proc. 2013-35, sec. 3.06, 2013-47 I.R.B. 537, 540.
The term “earned income” generally means the sum of the taxpayer’s wages
and earnings from self-employment that are includable in gross income for the - 12 -
taxable year. See sec. 32(c)(2). On the other hand, earned income excludes
unemployment compensation. See sec. 1.32-2(c)(2), Income Tax Regs. Petitioner
had earned income within the meaning of section 32(c) of $6,948 for 2014 and
would appear to satisfy the other requirements to qualify for an earned income
credit without regard to a qualifying child. The parties shall determine that matter
and compute the allowable amount of the earned income credit as part of their
Rule 155 computation.
To reflect the foregoing,
Decision will be entered
under Rule 155. - 13 -
APPENDIX
Nights that petitioner’s children spent at his home in 2014 Number of nights per stay Fri. Jan. 3 S Sat. Jan. 4 2 Fri. Jan. 10 S Sat. Jan. 11 2 Fri. Jan. 17 S Mon. Jan. 20 4 Fri. Jan. 24 S Sat. Jan. 25 2 Fri. Jan. 31 S Sat. Feb. 1 2 Fri. Feb. 7 S Sat. Feb. 8 2 Fri. Feb. 14 S Sun. Feb. 16 3 Fri. Feb. 21 S Sat. Feb. 22 2 Fri. Feb. 28 S Sat. Mar. 1 2 Fri. Mar. 7 S Sat. Mar. 8 2 Fri. Mar. 14 S Sat. Mar. 15 2 Fri. Mar. 21 S Sat. Mar. 22 2 Thurs. Mar. 27 S Sat. Mar. 29 3 Fri. Apr. 4 S Sat. Apr. 5 2 Fri. Apr. 11 S Sat. Apr. 19 9 Fri. Apr. 25 S Sat. Apr. 26 2 Fri. May 2 S Sat. May 3 2 Fri. May 9 S Sat. May 10 2 Fri. May 16 S Sat. May 17 2 Fri. May 23 S Sun. May 25 3 Fri. May 30 S Sat. May 31 2 - 14 -
Fri. Jun. 6 S Sat. Jun. 7 2 Fri. Jun. 13 S Sat. Aug. 23 72 Fri. Aug. 29 S Sun. Aug. 31 3 Fri. Sept. 5 S Sat. Sept. 6 2 Fri. Sept. 12 S Sat. Sept. 13 2 Fri. Sept. 19 S Sat. Sept. 20 2 Fri. Sept. 26 S Sat. Sept. 27 2 Fri. Oct. 3 S Sat. Oct. 4 2 Fri. Oct. 10 S Sat. Oct. 11 2 Thurs. Oct. 16 S Sat. Oct. 18 3 Fri. Oct. 24 S Sat. Oct. 25 2 Fri. Oct. 31 S Sat. Nov. 1 2 Fri. Nov. 7 S Sat. Nov. 8 2 Fri. Nov. 14 S Sat. Nov. 15 2 Fri. Nov. 21 S Sat. Nov. 22 2 Wed. Nov. 26 S Sat. Nov. 29 4 Fri. Dec. 5 S Sat. Dec. 6 2 Fri. Dec. 12 S Sat. Dec. 13 2 Fri. Dec. 19 S Sat. Dec. 20 2 Tues. Dec. 23 S Wed. Dec. 31 9 Total 175