The opinion
T.C. Summary Opinion 2010-66
UNITED STATES TAX COURT
EDWARD GREENE, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 5192-08S. Filed June 1, 2010.
Edward Greene, pro se.
Deborah Mackay, 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 (Code) in
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effect for the year in issue, and all Rule references are to the
Tax Court Rules of Practice and Procedure.
Respondent determined a deficiency of $4,751 in petitioner’s
2006 Federal income tax. The four issues for decision are
whether petitioner is entitled to: (1) Head of household filing
status; (2) a child tax credit; (3) the refundable portion of the
child tax credit; and (4) an earned income credit.
Background
Some of the facts have been stipulated and are so found.
The stipulation of facts, a subsequent supplemental stipulation
of facts, and the attached exhibits are incorporated herein by
this reference. At the time petitioner filed his petition he
resided in Illinois.
Petitioner was 57 years old in 2006 and retired from his
career job. In 2006 his income consisted of a taxable pension of
$9,690 and wages of $11,443 that he received as a part-time
security officer for the Chicago Board of Education.
Petitioner had a longtime girlfriend named Elmond Brown who
turned 53 in 2006. The trial record indicates, but is not
conclusive, that Elmond Brown lived with petitioner in his
apartment during 2006. Elmond Brown’s sister, Linda Jean Hayes
(Ms. Hayes), died of brain cancer in 1994. Ms. Hayes had a
daughter, Christina Hayes, who was 9 years old when Ms. Hayes
passed away. Elmond Brown adopted her niece in November 1999,
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and Christina’s legal name became Christina Hayes Brown (Ms.
Brown). As a result of petitioner’s relationship with Ms.
Brown’s adoptive mother, petitioner became a father figure to
her. During trial he referred to Ms. Brown as his niece.
Ms. Brown turned 20 in 2006. She has a biological daughter
named A.C.,1 who was 2 years old in 2006. During trial
petitioner referred to A.C. as his grandniece. A.C.’s biological
father, who was 18 years old in 2006, was incarcerated starting
in 2005 for a period of 2-1/2 years.
After A.C. was born, Ms. Brown lost her job and was in a
difficult financial position. Because of Ms. Brown’s financial
situation, petitioner in 2005 began paying the monthly rent for a
studio apartment for Ms. Brown and A.C. The apartment was around
the corner from petitioner’s three-bedroom apartment. Too many
people were visiting Ms. Brown’s apartment and disturbing the
baby. To remedy the situation Ms. Brown and A.C. moved into
petitioner’s apartment sometime in 2005, perhaps with Elmond
Brown already residing there. Ms. Brown and A.C. continued to
reside with petitioner until March 2007 when they moved to
Mississippi to be near family. Petitioner and Elmond Brown also
broke off their relationship around this time, suggesting that
she likely moved out of petitioner’s apartment as well.
1
The Court uses only the initials of minor children. See
Rule 27(a)(3).
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In 2006 Ms. Brown enrolled as a full-time student at
Westwood College, O’Hare Airport Campus, studying toward a degree
in medical insurance coding and billing. She obtained
educational financial aid in 2006 totaling $9,126, consisting of
$6,426 in student loans and a Pell Grant of $2,700. On her
college application forms and on her forms for financial aid, Ms.
Brown listed Elmond Brown as her mother residing at petitioner’s
address. Ms. Brown also listed petitioner’s address as her own
address on the same forms.
During the summer of 2006 Ms. Brown worked at a traveling
carnival. The record does not indicate the nature of her work,
whether she traveled outside of the area, or the amount of income
from that employment. Throughout 2006 Ms. Brown received food
stamps and Medicaid. She was enrolled in the Women in Crisis
(WIC) program but did not use the assistance provided by WIC.
Respondent stipulated that the Internal Revenue Service has no
record of a 2006 Federal income tax return for Ms. Brown, and
respondent confirmed that no third-party sources reported paying
her during 2006.
Elmond Brown filed a Federal income tax return for 2006
reporting $9,120 of taxable income. She claimed a full exemption
deduction for herself and one dependency exemption deduction.
The dependent was not Ms. Brown or A.C.
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Instead of preparing his own return, for the first time
petitioner engaged a national tax return preparation firm to
complete his 2006 Federal income tax return. The firm prepared a
Form 1040A, U.S. Individual Income Tax Return, for 2006,
reporting petitioner’s filing status as head of household and
reporting an associated standard deduction of $7,550.
Additionally, the return reflected dependency exemption
deductions for Ms. Brown and A.C., a child tax credit of $368 for
A.C., an additional child tax credit of $21 for A.C., and an
earned income credit of $3,206. An attached schedule listed both
Ms. Brown and A.C. as qualifying children for the earned income
credit.
In a notice of deficiency respondent disallowed both of
petitioner’s dependency exemption deductions, changed
petitioner’s filing status to single, and disallowed the child
tax credit, the additional child tax credit, and the earned
income credit. Petitioner filed a petition with this Court
challenging all of the disallowances in the notice of deficiency.
Respondent answered, denying each of petitioner’s challenges.
However, in respondent’s pretrial memorandum and in his
opening statement on the record, respondent stated that the only
issues to be decided were petitioner’s filing status and the tax
credits. Respondent no longer contested petitioner’s two
dependency exemption deductions. Accordingly, with respect to
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the two dependency exemption deductions, we deem that respondent
has abandoned or conceded the issue. See Muserlian v.
Commissioner, T.C. Memo. 1989-493, affd. 932 F.2d 109 (2d Cir.
1991).
Discussion
The Commissioner’s determination set forth in a notice of
deficiency is generally presumed correct, and the taxpayer bears
the burden of showing that the determination is in error. Rule
142(a)(1); INDOPCO, Inc. v. Commissioner, 503 U.S. 79, 84 (1992);
New Colonial Ice Co. v. Helvering, 292 U.S. 435, 440 (1934);
Welch v. Helvering, 290 U.S. 111, 115 (1933). Petitioner does
not argue that he satisfied the elements for a burden shift, but
even if he did, we need not and explicitly do not decide the
issue because we resolve this case on the preponderance of the
evidence and not on an allocation of the burden of proof,
rendering the issue of burden moot. See Knudsen v. Commissioner,
131 T.C. 185, 185-189 (2008); Cyman v. Commissioner, T.C. Memo.
2009-144.
Petitioner contends that he is entitled to head of household
filing status, the child tax credit, the additional child tax
credit, and an earned income credit because he supported Ms.
Brown and A.C. throughout 2006, including allowing them to live
with him for the entire year. We now turn to apply the law to
the facts of this case.
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I. Dependency Exemption Deductions
Because respondent has abandoned or conceded this issue, we
comment on the dependency exemption deductions solely for the
analysis of petitioner’s entitlement to the filing status and
credits at issue. We begin by noting that in 2006, Ms. Brown and
A.C. did not bear with respect to petitioner any of the
qualifying family relationships detailed in the relationship
requirements for a qualifying child under section 152(c)(2).
Therefore, they were not petitioner’s qualifying children.
Additionally, with respect to whether Ms. Brown and A.C.
were petitioner’s qualifying relatives, we note that section
152(d)(1)(D) provides that a qualifying relative may not be the
qualifying child of any other taxpayer. In this instance, Ms.
Brown and A.C. appear to satisfy the requirements to be Elmond
Brown’s qualifying children. They bore the right relationship
being, respectively, daughter and granddaughter; they appear to
have all resided together in petitioner’s apartment for all of
2006; they met the age requirement because Ms. Brown was age 20
while still a student in college; and furthermore, the record
establishes that neither Ms. Brown nor A.C. provided more than
one-half of her own support. The fact that Elmond Brown did not
claim the two individuals as her dependents is not determinative
because Elmond Brown was not required to file an income tax
return for 2006. See Notice 2008-5, 2008-1 C.B. 256.
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Accordingly, we find that Ms. Brown and A.C. were not
petitioner’s qualifying relatives for 2006.
II. Filing Status
The Code provides a favorable tax schedule for a taxpayer
who qualifies as a head of household. See sec. 1(b). A taxpayer
may file as a head of household if the taxpayer is not married at
the end of the year, is not a surviving spouse, and maintains a
home as the principal place of abode for a qualifying child or
any other person who is a dependent for more than one-half of the
taxable year. Sec. 2(b)(1). “Maintain” here means provide over
one-half of the cost of maintaining the household. Id. The
taxpayer bears the burden to prove entitlement to a filing status
more beneficial than single. Smith v. Commissioner, T.C. Memo.
2008-229. Because we have already found that petitioner had no
dependents in 2006 and because petitioner was unmarried at the
end of the year and was not a surviving spouse, his proper filing
status for 2006 is single. See sec. 1(c).
III. Child Tax Credit
The Code allows for a credit to be taken against the tax
imposed for each taxable year with respect to each qualifying
child of the taxpayer. Sec. 24(a). A “qualifying child” means a
qualifying child of the taxpayer as defined in section 152(c) who
has not reached the age of 17. Sec. 24(c). Because petitioner
had no qualifying children in 2006, he may not claim a child tax
credit for A.C. for 2006.
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IV. Additional Child Tax Credit
The child tax credit discussed above can be a refundable
credit to the taxpayer. Sec. 24(d). An additional, refundable,
credit is available for a taxpayer who could not claim the full
child tax credit to offset his tax liability. Since we have
already held that A.C. is not petitioner’s qualifying child and
thus petitioner does not qualify for the child tax credit,
petitioner is not entitled to the additional child tax credit for
2006.
V. Earned Income Credit
Individuals may be eligible for an earned income credit,
calculated as a percentage of earned income, if they meet certain
criteria. Sec. 32(a)(1); Rowe v. Commissioner, 128 T.C. 13, 15
(2007). The amount of the credit depends on the taxpayer’s
adjusted gross income, earned income, and the number of
qualifying children, if any, the taxpayer can claim. Sec. 32.
Petitioner claimed both Ms. Brown and A.C. as qualifying children
for purposes of the earned income credit. We have already held
that Ms. Brown and A.C. are not his qualifying children.
Therefore, petitioner may not claim them as qualifying children
for purposes of the earned income credit.
Nonetheless, a taxpayer who does not have qualifying
children may still be able to claim a smaller earned income
credit available for single taxpayers with no qualifying
children. To be eligible for this reduced credit, the taxpayer
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may not have income exceeding a statutory ceiling. Sec.
32(b)(2). In 2006 the ceiling was $12,120, measured against the
greater of the taxpayer’s earned income or adjusted gross income.
Sec. 32(j) (providing for an inflation adjustment); Rev. Proc.
2005-70, sec. 3.06(1), 2005-2 C.B. 979, 982 (pronouncing the
specific ceiling for 2006).
For purposes of the earned income credit, the law does not
consider pensions as constituting earned income. Sec.
32(c)(2)(B)(ii); Smith v. Commissioner, T.C. Memo. 1995-304; sec.
1.32-2(c)(2), Income Tax Regs. As a result, for 2006
petitioner’s earned income, excluding the $9,690 pension, was
$11,443, and his adjusted gross income was $21,133.
Therefore for 2006, because petitioner had no qualifying
children and because his adjusted gross income of $21,133 was
greater than the allowable income ceiling of $12,120, petitioner
is ineligible for the earned income credit.
VI. Conclusion
We commend petitioner, who is essentially retired and living
on a small income, for being so generous, supportive, and
protective of people who are not his blood relatives.
Summarizing for 2006, for the reasons stated above, petitioner is
entitled to dependency exemption deductions for Ms. Brown and
A.C., but the Code and administrative provisions render him
ineligible to claim head of household filing status, the child
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tax credit, the additional child tax credit, and the earned
income credit.
To reflect our disposition of the issues,
Decision will be entered
under Rule 155.