The opinion
T.C. Summary Opinion 2007-209
UNITED STATES TAX COURT
ANTONIO O. NEAL, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 12998-05S. Filed December 13, 2007.
Antonio O. Neal, pro se.
Frederic J. Fernandez and Mark Miller, for respondent.
GOLDBERG, 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. 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, subsequent
section references are to the Internal Revenue Code in effect for
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the year in issue, and all Rule references are to the Tax Court
Rules of Practice and Procedure.
Respondent determined a deficiency of $2,598 in petitioner’s
2003 Federal income tax and an accuracy-related penalty of
$519.60 under section 6662. After concessions,1 the issues for
decision are: (1) Whether petitioner is entitled to dependency
exemption deductions for his two minor children, (2) whether
petitioner is entitled to head of household filing status, (3)
whether petitioner is entitled to the earned income credit, (4)
whether petitioner is entitled to the additional child tax
credit, and (5) whether petitioner is liable for the accuracy-
related penalty under section 6662.
Background
The stipulation of facts and the attached exhibits are
incorporated herein by reference. At the time the petition was
filed, petitioner resided in Kenosha, Wisconsin.
Petitioner is self-employed as a general contractor.
Petitioner runs a small contracting business under the name “The
Untouchables”. Petitioner has two children: A.O.N. and A.V.N.2
1
At trial, respondent conceded that there was no wage
income of $2,430 or scholarship or grant income of $961 received
by petitioner, as determined in the notice of deficiency.
Respondent also conceded that petitioner was engaged in a trade
or business and therefore, was entitled to a $15,000 loss
reported on his Schedule C, Profit or Loss From Business.
2
The Court uses initials when referring to minor children.
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The mother of A.O.N. is Terry Clark (Ms. Clark). Ms. Clark
resides in Elgin, Illinois. During the year in issue, A.O.N. was
14 years old. The mother of A.V.N. is Kathryn M. Janecky (Ms.
Janecky). The record is silent with respect to Ms. Janecky’s
place of residence. During the year in issue, A.V.N. was 3 years
old.
Petitioner married Tamera Neal (Ms. Neal) (a.k.a. Tamera
Gudmundson,3 a.k.a. Tamera Clare4) in 2001. Petitioner and Ms.
Neal purchased a single-family home together in Zion, Illinois
(the Zion residence), sometime in 2001. The couple lived
together at the Zion residence from 2001 through the beginning of
2003 with Ms. Neal’s four children. At some time in early 2003,
petitioner’s son, A.O.N., came to live with him.
On March 1, 2003, petitioner entered into a rental agreement
between himself and Tamera Clare, lessor,5 (a.k.a. Ms. Neal) for
a month-to-month lease on an apartment located in Kenosha,
Wisconsin6 (the Kenosha apartment). The rental agreement
specified that the monthly rent due for the unit--$650--would be
3
Gudmundson is Ms. Neal’s former name by marriage.
4
Clare is Ms. Neal’s maiden name.
5
The record is silent as to when Ms. Neal became the lessor
on this apartment.
6
The Court takes judicial notice that the towns of Zion,
Ill., and Kenosha, Wis., are located 10 miles apart from each
other.
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paid only to Ms. Neal. From March 1, 2003, through the time of
trial, Ms. Neal remained in the Zion residence with her children.
Ms. Neal’s four children and A.O.N. were enrolled in the Zion-
Benton Township School District for the 2003-2004 school year.
On December 19, 2005, petitioner and Ms. Neal refinanced the
Zion residence by executing a new mortgage on the property. The
December 19, 2005, mortgage was made between Bergin Financial,
Inc., mortgagor, and “Antonio Neal and Tamera Gudmundson aka
Tamera Neal, Husband and Wife,” mortgagees. The parties agree
that petitioner and Ms. Neal were married throughout 2003, and as
of the date of trial.
Custody and Care of A.O.N. and A.V.N.
The record is silent as to any formal custody arrangement
between petitioner and Ms. Clark with respect to A.O.N. A.O.N.
has resided with petitioner since early 2003. Petitioner
receives no child support from Ms. Clark for A.O.N.
A.O.N. attended Zion-Benton Township High School so that he
would be able to provide afterschool care to Ms. Neal’s four
children who were of elementary school age.
Petitioner provided all the financial support for A.O.N.
during the taxable year in issue, including enrolling A.O.N. in
numerous afterschool and weekend athletics programs at the YMCA.
With respect to A.V.N., the parties agree that Ms. Janecky
was the custodial parent of the child during the year in issue.
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Pursuant to a Stipulation and Order for Child Support (Order)
entered by the Circuit Court of Racine County, Wisconsin, on
November 10, 2000, Ms. Janecky was awarded primary custody, with
petitioner receiving visitation with the child, “at all
reasonable times upon prior notice to the mother.” According to
his arrangement with Ms. Janecky, petitioner had custody of
A.V.N. every other weekend, and throughout the entire summer.
The record is inconclusive, however, as to where A.V.N. stayed
when the child visited petitioner during the year in issue.7
Petitioner provided financial support for A.V.N. when the
child stayed with him, including providing summer vacations,
trips, clothing, and food. Pursuant to the Order, petitioner was
ordered to pay $26 per week in child support for A.V.N.
The Order also provided that petitioner would be entitled to
claim a dependency exemption deduction for A.V.N. “every other
year * * * following the date of this document”. Petitioner
claimed a dependency exemption deduction for A.V.N. in the year
at issue, but he did not attach a Form 8332, Release of Claim to
Exemption for Child of Divorced or Separated Parents,8 to his
2003 Federal income tax return.
7
Ms. Neal testified that A.V.N. stayed at the Zion
residence, while petitioner indicated that the child was with him
at the Kenosha apartment during visits.
8
The record is silent as to whether petitioner and Ms.
Janecky were ever married.
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Filing of Petitioner’s 2003 Federal Income Tax Return
Petitioner’s Form 1040, U.S. Individual Income Tax Return,
was prepared and electronically filed by H&R Block Tax Services
located in Gurnee, Illinois. Petitioner filed his return as head
of household and claimed two children as dependents, the earned
income credit, and the additional child tax credit. In the
notice of deficiency, respondent determined that petitioner’s
filing status was married filing separately and disallowed the
two claimed dependency exemption deductions, the earned income
credit, and the additional child tax credit. The tax return
preparer prepared petitioner’s return based on information that
petitioner provided. Petitioner’s 2003 return was filed on April
6, 2004.
Discussion
In general, respondent’s determinations as set forth in a
notice of deficiency are presumed correct. Welch v. Helvering,
290 U.S. 111, 115 (1933). In pertinent part, Rule 142(a)(1)
provides the general rule that the burden of proof shall be upon
the taxpayer. In certain circumstances, however, if the taxpayer
introduces credible evidence with respect to any factual issue
relevant to ascertaining the proper tax liability, section 7491
shifts the burden of proof to the Commissioner. Sec. 7491(a)(1);
Rule 142(a)(2). Petitioner does not argue that section 7491 is
applicable in this case, and he has not established that the
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burden of proof should shift to respondent. Petitioner,
therefore, bears the burden of proving that respondent’s
determinations in the notice of deficiency are erroneous. See
Rule 142(a); Welch v. Helvering, supra at 115.
Dependency Exemption Deductions
Petitioner claimed dependency exemption deductions for
A.O.N. and A.V.N. for taxable year 2003. Section 151 allows
deductions for personal exemptions, including exemptions for
dependents of the taxpayers. See sec. 151(c). Section 152(a)
defines the term “dependent”, in pertinent part, to include a son
or daughter of the taxpayer over half of whose support for the
calendar year was received from the taxpayer. The term “support”
includes food, shelter, clothing, medical and dental care,
education, and the like. Sec. 1.152-1(a)(2)(i), Income Tax Regs.
In determining whether an individual received more than half of
his or her support from a taxpayer there shall be taken into
account the amount of support received from the taxpayer as
compared to the entire amount of support which the individual
received from all sources. Id.
Section 152(e) provides a special support test for children
of individuals who are no longer or were never married. See King
v. Commissioner, 121 T.C. 245, 248-249 (2003). Simply put,
section 152(e) provides that if a child receives over half of his
or her support from his or her parents and is in the custody of
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one or both of them for more than half of the calendar year, then
the parent having custody of the child for a greater portion of
the year at issue (the custodial parent) is entitled to claim the
dependency exemption deduction for that child unless, as relevant
here, the custodial parent has validly executed a written release
of his or her right to claim the dependency exemption deduction.
With respect to A.O.N., we first note that respondent did
not disallow the exemption claimed by petitioner because the
child had also been claimed by another taxpayer. Rather,
respondent disallowed the exemption claimed for A.O.N. on the
grounds that petitioner had failed to substantiate that he
supported A.O.N. and that A.O.N. resided with petitioner during
the year in issue.
Based on the testimony and evidence provided, we are
convinced that A.O.N. resided with petitioner for the majority of
the 2003 taxable year. Our conclusion is buttressed by a letter
from the Registrar of the Zion-Benton Township School District
stating that A.O.N. was “in the custody of his father, Antonio
Neal Sr., for the 2003-2004 school year”. We also find
petitioner’s testimony that A.O.N. was enrolled at the YMCA
throughout 2003 to be credible and convincing.
With respect to respondent’s argument that A.O.N. could have
stayed with his mother and still attended school in Zion, the
Court takes notice that the towns of Elgin and Zion are located
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more than 60 miles apart, thus making the possibility of a daily
commute to and from school in excess of 2 hours highly
improbable. Accordingly, we find that A.O.N. resided with
petitioner for the greater portion of the year in issue, and that
petitioner is, therefore, entitled to the dependency exemption
deduction pursuant to section 152(e)(1) with respect to A.O.N.
With respect to A.V.N., petitioner admits that he was not
the custodial parent of her in 2003. Moreover, although
petitioner did provide support for A.V.N. during the year in
issue of $26 per week, in addition to those incidental costs that
he incurred in providing for the child’s needs during visitation
times, he did not either provide substantiation for these amounts
or show the total amount of support provided to the child as
required under section 152. See sec. 1.152-1(a)(2)(i), Income
Tax Regs.
With respect to petitioner’s argument that he was
unequivocally entitled to claim the dependency exemption
deduction for A.V.N. based on the language in the aforementioned
Order, the law is clear that State courts, by their decisions,
cannot determine issues of Federal tax law. See Commissioner v.
Tower, 327 U.S. 280, 288 (1946).
Finally, petitioner did not attach a Form 8332 pertaining to
A.V.N. to his 2003 return. His argument that the H&R Block
office that assisted him in the preparation of his 2003 return
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was to blame for this error is both unconvincing and without
merit.9 It is the taxpayer’s duty, and not his return preparer’s
duty, to attach a valid Form 8332, or an equivalent written
declaration, to the return at the time of filing; this failure
prohibits the taxpayer from claiming a dependency exemption
deduction for his or her minor child. See Presley v.
Commissioner, T.C. Memo. 1996-553. Accordingly, we sustain
respondent’s determination with respect to petitioner’s claimed
dependency exemption deduction for A.V.N. only.
Head of Household Filing Status
Petitioner filed his 2003 return as head of household, and
respondent determined that petitioner’s filing status was married
filing separately in the notice of deficiency. Respondent’s
determination was made on the ground that petitioner had not
sufficiently established that he was not married to Ms. Neal in
2003.
Section 1(b) imposes a special income tax rate on an
individual filing as head of a household. Section 2(b) provides
the requirements for head of household filing status. As
relevant here, to qualify as a head of household, a taxpayer must
(a) be unmarried at the end of the taxable year, (b) not be a
surviving spouse, and (c) maintain as the taxpayer’s home a
9
Petitioner testified that he was not aware of the Form
8332 requirement until the time of trial.
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household that constitutes the principal place of abode of an
unmarried son or daughter. Sec. 2(b)(1).
Section 2(b)(1) clearly states that “an individual shall be
considered a head of a household if, and only if, such individual
is not married at the close of his taxable year”. Petitioner has
the burden of proving that he was unmarried. Rule 142(a).
The record is clear that petitioner was still married to Ms.
Neal at the close of the taxable year 2003. First, both
petitioner and Ms. Neal testified that they were still married as
of the date of trial. Second, we are unconvinced from our review
of the record before us that petitioner and Ms. Neal were
separated and maintaining separate households during the year in
issue. See secs. 2(c), 7703(b). Although the lease contained in
the record specifies that all rents were to be paid to Ms. Neal,
neither petitioner nor Ms. Neal produced any proof at trial that
petitioner paid the rent on the Kenosha apartment. Petitioner
did not produce any evidence that he paid any costs associated
with the maintenance of the Kenosha apartment, including garbage
collection costs, cable television, or telephone service.10
When asked by the Court why petitioner did not bring any
proof of his residence in 2003 to Court, petitioner replied that
he only brought those documents listed in a letter provided to
10
According to the lease, the rent for the unit covered all
utilities. Cable, television, telephone, and garbage collection
costs were the responsibility of the lessee.
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him by respondent, and that had he known that the Court would
require proof of his residence in Kenosha, he would have brought
those documents with him.
The burden of refuting respondent’s determinations rests
with petitioner. Rule 142(a)(1). It is not respondent’s duty to
ensure that petitioner is aware of the evidence that he or she
may need to present before the Court. Further, petitioner
received a Standing Pretrial Notice from the Court which informed
petitioner to “organize” and “present all documents” at trial
pertinent to his case. Petitioner was aware that both his
marital status and place of residence in 2003 were at issue in
this case.11 It follows, therefore, that petitioner has not met
his burden in refuting respondent’s determination with respect to
his marital status for 2003.
Accordingly, and based on the foregoing, we hold that
petitioner is not entitled to head of household filing status for
the taxable year 2003. Respondent’s determination on this issue
is sustained.
Earned Income Credit
As previously stated, petitioner claimed an earned income
credit for 2003 with A.O.N. and A.V.N. as the qualifying
11
As grounds for review, the petitioner lists on his
petition to the Court that he “filed a true and complete tax
return” and that he and his wife “were separated” and living
apart during the year in issue.
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children. In the notice of deficiency, respondent disallowed the
earned income credit in full.
Subject to certain limitations, an eligible individual is
allowed a credit which is calculated as a percentage of the
individual’s earned income amount. Sec. 32(a)(1). One such
limitation applies to married individuals. Section 32(d)
provides: “In the case of an individual who is married (within
the meaning of section 7703), this section shall apply only if a
joint return is filed for the taxable year under section 6013.”
Section 7703(a)(1) provides that “the determination of whether an
individual is married shall be made as of the close of his
taxable year” and that certain married individuals living apart
shall not be considered as married.
The parties agree that petitioner was still married to Ms.
Neal at the close of the taxable year 2003, and for reasons
previously stated, the Court is not satisfied that petitioner
was living apart from Ms. Neal in 2003. Accordingly, since
petitioner did not file a joint return for taxable year 2003, is
still married to Ms. Neal, and cannot prove that he was separated
from Ms. Neal in 2003, he is not entitled to an earned income
credit for taxable year 2003. Respondent’s determination on this
issue is sustained.
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Additional Child Tax Credit
Petitioner claimed the additional child tax credit with
respect to A.O.N. and A.V.N. for the taxable year 2003. 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 any
individual with respect to whom the taxpayer is allowed a
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).
For reasons previously discussed, petitioner is entitled to
the dependency exemption deduction with respect to A.O.N. under
section 151. Therefore, A.O.N. is petitioner’s only qualifying
child, and petitioner is entitled to a child tax credit with
respect to A.O.N. only.
Section 6662 Penalty
The final issue is whether petitioner is liable for the
accuracy-related penalty for the year 2003 under section 6662
for negligence, disregard of rules or regulations, or a
substantial understatement of income tax. Sec. 7491(c) places
upon the Commissioner the burden of production with respect to
any penalty or addition to tax. Based on the record, we hold
that respondent has satisfied the burden with respect to the
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section 6662(a) accuracy-related penalty for the reasons
discussed hereinafter.
Section 6662(a) applies to any portion of an underpayment of
tax required to be shown on a return in an amount equal to 20
percent of the portion of the underpayment to which section 6662
applies. Section 6662(b)(1) provides that the penalty shall
apply to any underpayment attributable to negligence or disregard
of rules or regulations.
Section 6662(c) provides that the term “negligence” includes
any failure to make a reasonable attempt to comply with the
provisions of the Internal Revenue laws, and the term “disregard”
includes any careless, reckless, or intentional disregard of
rules or regulations. Negligence is the lack of due care or
failure to do what a reasonable and ordinarily prudent person
would do under the circumstances. Neely v. Commissioner, 85 T.C.
934, 947 (1985).
Negligence frequently takes the form of overstated
deductions. Alberico v. Commissioner, T.C. Memo. 1995-542.
Overstatement of deductions can reflect the taxpayer’s inability
to maintain adequate records; this inadequacy alone may be
grounds for imposing the penalty. Id. A taxpayer is required to
maintain records sufficient to establish information provided on
a tax return. Id. Failure to maintain records to substantiate
claimed deductions is evidence, therefore, of taxpayer
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negligence.
Petitioner filed his 2003 return as head of household and
claimed dependency exemption deductions for two minor children,
the earned income credit, and the additional child tax credit.
As previously discussed, petitioner was entitled to claim a
dependency exemption deduction for only one child, A.O.N., based
on the evidence presented to the Court. Respondent’s other
determinations were sustained.
With respect to the sustained determinations, petitioner was
responsible for complying with the provisions underlying the
requirements for the claimed deductions and filing status, and to
maintain records adequate to establish his entitlement thereto.
Petitioner failed to do this.
Accordingly, and based on the foregoing,
Decision will be entered
under Rule 155.