Nowran Gopi

T.C. Summary Opinion 2021-41UNITED 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
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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 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.
1
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.
2
Respondent concedes that petitioner is not liable for an accuracy-related
penalty under sec. 6662(a) for the year in issue.
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I. 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
3
them by their initials. See Rule 27(a)(3).
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II. 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 self-
employment 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.
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Discussion
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).
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Petitioner 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.
4
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.
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II. 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”.
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I.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
5
P.A.E. was born in fall 2015 and lived with petitioner and Ms. Kapoor for
the remainder of the year.
6
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
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is 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”.
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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
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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
7
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.
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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).