T.C. Summary Opinion 2021-41

T.C. Summary Opinion 2021-41

UNITED STATES TAX COURT

NOWRAN GOPI, Petitioner v.

COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 20779-17S.

Filed December 2, 2021.

Joseph W. Pinto, Jr., for petitioner.

Francesca Chou, for respondent.

SUMMARY OPINION

PANUTHOS, Special Trial Judge: This case was heard pursuant to the

provisions of section 7463 of the Internal Revenue Code (Code) in effect when the

Served 12/02/21

-2petition 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 of $6,453 in Federal income tax and a

section 6662(a) accuracy-related penalty of $1,291 for petitioner’s taxable year

2015 (year in issue). After concessions,2 the issues for decision are whether

petitioner is entitled to: (1) dependency exemption deductions for two of his

grandchildren; (2) head of household filing status; (3) the additional child tax

credit; and (4) the earned income tax credit (EIC).

Background

Some of the facts have been stipulated and are so found. We incorporate the

stipulation of facts and the attached exhibits by this reference. The record consists

of the stipulation of facts with attached exhibits, exhibits introduced at trial, and

petitioner’s testimony. Petitioner resided in New York when the petition was

timely filed.

Unless otherwise indicated, all section references are to the Code in effect

at all relevant times, and all Rule references are to the Tax Court Rules of Practice

and Procedure. All dollar amounts are rounded to the nearest dollar.

1

Respondent concedes that petitioner is not liable for an accuracy-related

penalty under sec. 6662(a) for the year in issue.

2

-3I.

Petitioner’s Residence and Family

Petitioner resided in Schenectady, New York, during the year in issue.

Petitioner is a widower and father to Lata Kapoor. In March 2015 Ms. Kapoor and

her minor child I.M.E. moved from Chicago, Illinois, to Schenectady to live with

petitioner.3 Ms. Kapoor moved into her father’s home because of domestic

problems with her spouse, Pedro Escamilla. Although Ms. Kapoor had been

married to Mr. Escamilla since April 2014, petitioner was unaware of their

marriage. During a two-week period in fall 2015, Ms. Kapoor traveled to Chicago

and gave birth to her second child, P.A.E., before returning to petitioner’s home

where she continued to reside for the remainder of the year.

During his daughter’s stay in his home, petitioner paid all rent and utilities.

Petitioner also purchased clothes for his daughter and her children and provided

cellular telephone and cable television service. Ms. Kapoor received Supplemental

Nutrition Assistance Program benefits from March to September 2015, and

Women, Infants, and Children benefits during November and December 2015.

It is the policy of this Court not to identify minor children. We refer to

them by their initials. See Rule 27(a)(3).

3

-4II.

Petitioner and His Daughter’s 2015 Tax Returns

Petitioner timely filed his 2015 Form 1040, U.S. Individual Income Tax

Return, claiming: (1) dependency exemption deductions for his grandchildren

I.M.E. and P.A.E., (2) head of household filing status, (3) the additional child tax

credit for I.M.E. and P.A.E., and (4) the EIC. Petitioner reported adjusted gross

income of $11,679. In April 2017 petitioner reported an additional $5,100 of selfemployment income and claimed an additional EIC and child tax credit for the year

in issue on Form 1040X, Amended U.S. Individual Income Tax Return. Along

with other adjustments, the additional income resulted in an adjusted gross income

of $15,545 as reported on petitioner’s 2015 Form 1040X.

In April 2016 Ms. Kapoor and her spouse jointly filed a 2015 Form 1040.

The couple claimed their children, I.M.E. and P.A.E., as dependents for purposes

of dependency exemption deductions, the additional child tax credit, and the EIC.

III.

Notice of Deficiency

Respondent selected petitioner’s 2015 tax return for examination. On

August 1, 2017, respondent issued a notice of deficiency to petitioner for the year

in issue. In the notice respondent disallowed the dependency exemption

deductions for I.M.E. and P.A.E., head of household filing status, the additional

child tax credit, and the EIC.

-5Discussion

I.

Burden of Proof

In general, the Commissioner’s determination set forth in a notice of

deficiency is presumed correct. Welch v. Helvering, 290 U.S. 111, 115 (1933).

Deductions are a matter of legislative grace, and a taxpayer bears the burden of

proving that he is entitled to any deduction claimed. INDOPCO, Inc. v.

Commissioner, 503 U.S. 79, 84 (1992); New Colonial Ice Co. v. Helvering, 292

U.S. 435, 440 (1934).

Rule 142(a)(1) sets forth the general rule that the burden of proof shall be on

the taxpayer, except as otherwise provided by statute or determined by the Court,

and except that the burden of proof shall be upon the Commissioner in respect of

any new matter, increases in deficiency, and affirmative defenses. Rolfs v.

Commissioner, 135 T.C. 471, 482 (2010), aff’d, 668 F.3d 888 (7th Cir. 2012).

Section 7491(a)(1) provides an exception that shifts the burden of proof to the

Commissioner as to any factual issue relevant to a taxpayer’s liability for tax if

(1) the taxpayer introduces credible evidence with respect to such issue, sec.

7491(a)(1), and (2) the taxpayer satisfies certain other conditions, including

substantiation of any item and cooperation with the Government’s requests for

witnesses and information, sec. 7491(a)(2); see also Rule 142(a)(2).

-6Petitioner contends that he has satisfied the requirements of section 7491(a)

and therefore the burden of proof as to all factual issues affecting the deficiency in

tax for the year in issue should shift to respondent.4

Section 7491(a) requires petitioner to introduce credible evidence with

respect to each issue for which he seeks to shift the burden of proof. See Higbee v.

Commissioner, 116 T.C. 438, 442-443 (2001). Whether petitioner’s daughter and

her husband filed a valid 2015 Form 1040 is a factual issue relevant to whether

petitioner is entitled to the deductions and filing status that he claimed for the year

in issue. We have found on the basis of a copy of the 2015 Form 1040 and the

related IRS account transcript, which are a part of this record, that a joint tax return

was filed by Ms. Kapoor and her husband for the year in issue. Petitioner has

neither claimed nor produced any evidence that either his daughter’s marriage or

her joint 2015 Form 1040 is invalid. Given that these facts are clearly established,

the burden of proof does not play any role in this case.

In the alternative petitioner asserts that respondent bears the burden of proof

in this matter because respondent’s determination was based upon the production

of a 2015 joint tax return filed by petitioner’s daughter and her husband. Petitioner

claims that the production of said tax return constitutes an affirmative defense

under Rules 39 and 142(a). Rule 39 describes the pleading of special matters. The

introduction into evidence of Ms. Kapoor and Mr. Escamilla’s 2015 joint tax return

is not a special matter and does not constitute an affirmative defense.

4

-7II.

Dependency Exemption Deductions

Section 151(a) and (c) allows taxpayers an annual exemption deduction for

each “dependent” as defined in section 152. As relevant here section 152(a)

defines a “dependent” to mean a “qualifying child” of the taxpayer.

Petitioner contends that I.M.E. and P.A.E. are his qualifying children. To be

a qualifying child of the taxpayer for a taxable year, 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) meet certain age

requirements; (D) not have provided more than one-half of his or her own support

for the year; and (E) if married, not have filed a joint return (other than only for a

claim of refund) with his or her spouse. Sec. 152(c)(1).

If multiple individuals claim the same qualifying child on their tax returns,

the tie-breaker rule under section 152(c)(4) determines which individual is entitled

to claim the “qualifying child” as a dependent. Sec. 152(c)(4)(A). Specifically,

section 152(c)(4)(A)(i) provides: “[I]f * * * an individual may be claimed as a

qualifying child by 2 or more taxpayers for a taxable year beginning in the same

calendar year, such individual shall be treated as the qualifying child of the

taxpayer who is * * * a parent of the individual”.

-8I.M.E. and P.A.E. satisfy the requirements to be claimed as qualifying

children under section 152(c)(1) by each of petitioner and Ms. Kapoor for the year

in issue: (1) they are petitioner’s grandchildren and Ms. Kapoor’s children;

(2) they had the same principal place of abode as both petitioner and Ms. Kapoor

for more than one-half the year;5 (3) they were minors during that year; (4) they

did not provide more than one-half of their own support during that year; and

(5) neither of the children was married or filed a joint return for that year. See sec.

152(c)(1).

Since petitioner and Ms. Kapoor each claimed I.M.E. and P.A.E. as

dependents on their tax returns, the tie-breaker rule in section 152(c)(4)(A)(i)

determines that the children shall be treated as the qualifying children of the

taxpayer who is their parent. Therefore, I.M.E. and P.A.E. were the qualifying

children of Ms. Kapoor for the year in issue.

Because neither P.A.E. nor I.M.E. may be considered the “qualifying child”

of petitioner, he is not entitled to claim them as dependents. 6 Therefore, petitioner

P.A.E. was born in fall 2015 and lived with petitioner and Ms. Kapoor for

the remainder of the year.

5

If an individual claimed on a taxpayer’s tax return as a dependent fails to

meet the definition of a “qualifying child” under sec. 152(c), that individual might

nevertheless be claimed under sec. 152(d) as a “qualifying relative” if certain

6

-9is not entitled to claim dependency exemption deductions for the taxable year

2015.

III.

Head of Household Filing Status

Section 1(b) provides an advantageous tax rate schedule for a taxpayer who

qualifies as a “head of household”. Section 2(b)(1) defines a head of household, as

relevant to the instant case, as an individual who: (1) is unmarried as of the close

of the taxable year and is not a surviving spouse, and (2) maintains as his home a

household that constitutes for more than one-half of the taxable year the principal

place of abode, as a member of such household, of (a) a qualifying child of the

individual (as defined in section 152(c), determined without regard to section

152(e)), or (b) any other person who is a dependent of the taxpayer, if the taxpayer

is entitled to a deduction for the taxable year for such person under section 151.

See Rowe v. Commissioner, 128 T.C. 13, 16-17 (2007).

Petitioner claimed head of household status for the year in issue on the

ground that he maintained a household for his grandchildren, each of whom he

claimed as a “qualifying child”. As discussed above, neither I.M.E. nor P.A.E.

conditions are met. For a taxpayer to claim a dependency exemption deduction for

a qualifying relative, the claimed individual cannot be the qualifying child of the

taxpayer or any other taxpayer for the taxable year. Sec. 152(d)(1)(D). As Ms.

Kapoor was entitled to and did claim each of her children as a “qualifying child”,

neither of the children may be claimed by petitioner as a “qualifying relative”.

- 10 may be claimed as the “qualifying child” of petitioner under section 152(c), nor

has petitioner made the case that he otherwise qualifies for deductions for them as

dependents under section 151(c). Therefore, petitioner is not entitled to claim head

of household filing status for the taxable year 2015.

IV.

Child Tax Credit

A taxpayer is entitled to claim a child tax credit for each “qualifying child”,

as defined in section 152(c), who has not attained age 17 during the taxable year.

Sec. 24(a). A portion of the credit--commonly referred to as the additional child

tax credit--is refundable to the taxpayer. Sec. 24(d). As previously discussed,

petitioner may not claim I.M.E. and P.A.E. as his qualifying children for purposes

of section 152(c). Thus, petitioner is not entitled to claim the additional child tax

credit for the year in issue.

V.

Earned Income Tax Credit

An eligible individual is entitled to a credit against his Federal income tax

liability, calculated as a percentage of his earned income, subject to certain

limitations. Sec. 32(a)(1); Rowe v. Commissioner, 128 T.C. at 15. Different

percentages and amounts are used to calculate the EIC, depending on whether the

eligible individual has no qualifying children, one qualifying child, or two or more

qualifying children. Sec. 32(b); Rowe v. Commissioner, 128 T.C. at 15. The

- 11 definition of “qualifying child” for purposes of section 32 is the same definition as

provided in section 152(c). Sec. 32(c)(3)(A). We concluded supra that I.M.E. and

P.A.E. are not petitioner’s qualifying children for purposes of section 152(c).

Therefore, petitioner is not entitled to the EIC with two qualifying children as

claimed on his return for the year in issue. 7

VI.

Conclusion

We conclude that petitioner was not aware that his daughter filed a joint tax

return with her spouse for 2015. The test of eligibility, however, is not contingent

upon petitioner’s knowledge of his daughter’s marital or filing status but rather

whether petitioner satisfies the applicable provisions of the Code. To that end, we

have concluded that petitioner is not eligible for the claimed deductions and

credits. We need not decide whether petitioner’s lack of knowledge of his

Individuals without qualifying children may be eligible for the EIC if their

earned income is no greater than the phaseout amount the Code permits. Rev.

Proc. 2014-61, sec. 3.06, 2014-47 I.R.B. 860, 863, lists the amounts used to

determine the EIC for 2015 under sec. 32(b). The revenue procedure lists the

completed phaseout amount as $14,820 for an individual with no qualifying

children. Id. The “completed phaseout amount” is the amount of adjusted gross

income (or, if greater, earned income) at or above which no credit is allowed. Id.

As reported on his amended tax return, petitioner’s adjusted gross income and

earned income both exceeded the phaseout amount of $14,820 for 2015.

Accordingly, he is ineligible to claim the EIC under sec. 32(c)(1)(A)(ii) as an

individual without a qualifying child for the year in issue.

7

- 12 daughter’s marriage or joint tax return filing plays a role in the penalty

determination, because respondent has conceded the section 6662(a) penalty.

For the reasons discussed herein, petitioner is not entitled to the claimed

dependency exemption deductions, credits, or head of household filing status.

Respondent’s determination for the year in issue is therefore sustained. We have

considered all of the parties’ arguments, and, to the extent not addressed herein, we

conclude that they are moot, irrelevant, or without merit. To reflect the foregoing,

Decision will be entered for

respondent as to the deficiency and for

petitioner as to the accuracy-related penalty

under section 6662(a).