Stapleton v. Comm'r

PARIS, Judge: Respondent determined a deficiency of $4,010 in petitioner's Federal income tax for 2011. After concessions, the issues for decision are whether petitioner is entitled to: (1) dependency exemption *172 deductions for his minor children; (2) the earned income credit;¹ (3) the child tax credit; and (4) head of household filing status.

Some of the facts have been stipulated and are so found. The stipulated facts and facts drawn from stipulated exhibits are incorporated herein by this reference. Petitioner resided in Missouri at the time he filed his petition.

Petitioner has two minor children, L.H. and K.H.² Petitioner and the children's mother were never married and did not live together during the year in issue. Petitioner and the mother had a verbal agreement that L.H. and K.H. would reside with him every Monday and Wednesday night and every other weekend. As of the time of trial*206 the custody of L.H. and K.H. had not been adjudicated by any court.³ L.H. and K.H. resided with petitioner for 176 days in 2011.^4*207 Petitioner *173 stipulated that the mother was L.H. and K.H.'s custodial parent and that he was their noncustodial parent in 2011.

Petitioner filed a Form 1040, U.S. Individual Income Tax Return (return), for 2011, on which he claimed dependency exemption deductions, the child tax credit, the earned income credit, and head of household filing status in relation to L.H. and K.H. Petitioner did not attach Form 8332, Release/Revocation of Release of Claim to Exemption for Child by Custodial Parent, or a similar written statement to the return.

Respondent issued a notice of deficiency to petitioner for 2011 disallowing petitioner's claimed: (1) dependency exemption deductions; (2) earned income credit; (3) child tax credit; and (4) head of household filing status.

Generally, the Commissioner's determination set forth in a notice of deficiency is presumed correct, and the taxpayer bears the burden of showing the determination is in error. Rule 142(a); Welch v. Helvering, 290 U.S. 111, 115, 54 S. Ct. 8, 78 L. Ed. 212, 1933-2 C.B. 112 (1933). Deductions and credits are a matter of legislative grace, and the taxpayer bears the burden of proving entitlement to any deduction*208 or credit claimed on a return. INDOPCO, Inc. v. Commissioner, 503 U.S. 79, 84, 112 S. Ct. 1039, 117 L. Ed. 2d 226 (1992); New Colonial Ice Co. v. Helvering, 292 U.S. 435, 440, 54 S. Ct. 788, 78 L. Ed. 1348, 1934-1 C.B. 194 (1934).

Under certain circumstances the burden of proof as to factual matters shifts to the Commissioner pursuant to section 7491(a). Petitioner did not argue the applicability of section 7491(a), and the record demonstrates that the burden of proof does not shift to respondent with respect to any of the issues in this case because petitioner did not satisfy the requirements of paragraph (2). Accordingly, petitioner bears the burden of proof for all issues in dispute.

The Code allows as a deduction an exemption for each dependent of a taxpayer in computing taxable income. Sec. 151(c). Section 152(a) defines a dependent as a qualifying child or a qualifying relative of the taxpayer. *175 To be a taxpayer's qualifying child under section 152(c)(1), 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; and (D) have not provided over one-half of his or her own support for the year.

L.H. and K.H. resided with petitioner for 176 days in 2011, less than one-half of the taxable year. They did not have the same principal place of abode as petitioner under*209 subparagraph (B) of section 152(c)(1) and, therefore, were not his qualifying children under subsection (c) for 2011.

In the case of divorced or separated parents, section 152(e) provides a special rule notwithstanding subparagraph (B) of subsection (c)(1) to determine which parent is entitled to a dependency exemption deduction for a child. Section 152(e) also applies to parents who were never married. King v. Commissioner, 121 T.C. 245 (2003).

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 year will be considered the qualifying child of the custodial parent. Sec. 152(e)(1). Section 152(e)(4)(A)*176 defines the custodial parent as "the parent having custody for the greater portion of the calendar year." Section 152(e)(4)(B) defines the noncustodial parent as "the parent who is not the custodial parent."

L.H. and K.H. resided with petitioner for 176 days and with the mother for 189 days in 2011. The mother was the minor children's custodial parent for 2011. Seesec. 152(e)(4)(A) Petitioner did not challenge that the mother was the custodial parent for 2011; indeed, he stipulated that fact and the fact*210 that he was the minor children's noncustodial parent for 2011.

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 met. Relevant here is the requirement 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 or on a statement conforming to the substance of Form 8332." Miller v. Commissioner, 114 T.C. 184, 189 (2000), aff'd on another ground sub nom. Lovejoy v. Commissioner, 293 F.3d 1208 (10th Cir. 2002). "Form 8332 provides an effective and uniform way for a custodial parent to make *177 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).

To be entitled to the dependency exemption deductions for L.H. and K.H. under section 152(e), petitioner must have attached a completed Form 8332 or a similar written statement to the return. He did not do so. Without a Form 8332 or a similar written statement containing the information prescribed by section 152(e)(2), the Court is required to find that petitioner is not entitled to*211 the dependency exemption deductions for L.H. and K.H. for 2011. See Swint v. Commissioner, 142 T.C. 131, 139 (2014).

Section 32(a)(1) provides an eligible individual with an earned income credit against the individual's income tax liability, subject to a phaseout in paragraph (2). Section 32(b) prescribes different percentages and amounts used to calculate the credit. The amount of the credit to which an eligible individual is entitled increases if the individual has a qualifying child (as defined in section 152(c) and determined without regard to the special rule for waiver from the custodial parent under section 152(e)). Sec. 32(b), (c)(3).

*178 Because L.H. and K.H. are not petitioner's qualifying children under section 152(c) for the reason suited above, petitioner is not entitled to the entire amount of the earned income credit he claimed for 2011; but he is entitled to the amount respondent conceded.⁵

Subject to limitations, section 24(a) allows a child tax credit with respect to a qualifying child of the taxpayer as described in section 152(c) who has not attained age 17, seesec. 24(c)(1), for whom the taxpayer is allowed a deduction under section 151. Because L.H. and K.H. are not petitioner's qualifying children under section 152(c) for the reason stated above, petitioner is not entitled to the child*212 tax credit for 2011.

Section 1(b) provides a special tax rate for an individual who qualifies as a head of household. As relevant herein, an unmarried individual "shall be considered a head of a household if, and only if" that individual "maintains as his home a household which constitutes for more than one-half of such taxable year the principal place of abode" of "a qualifying child of the individual (as defined in section 152(c) * * *)'. Sec. 2(b)(1)(A)(i). Because L.H. and K.H. are not *179 petitioner's qualifying children under section 152(c) for the reason stated above, petitioner is not entitled to head of household filing status for 2011.

L.H. and K.H. are not petitioner's qualifying children under the Code. Therefore, he is not entitled to dependency exemption deductions, the earned income credit, the child tax credit, or head of household filing status in relation to them.

The Court has considered all arguments made, and, to the extent not mentioned, the Court concludes that they are moot, irrelevant, or without merit.

To reflect the foregoing,

Decision will be entered

under Rule 155.