                  T.C. Summary Opinion 2002-75



                     UNITED STATES TAX COURT



                  JOHN J. DEWALD, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 1503-01S.              Filed June 26, 2002.



     John J. DeWald, pro se.

     James N. Beyer, for respondent.



     DINAN, 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.    The decision to be

entered is not reviewable by any other court, and this opinion

should not be cited as authority.   Unless otherwise indicated,

subsequent section references are to the Internal Revenue Code in

effect for the year in issue.
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      Respondent determined a deficiency in petitioner’s Federal

income tax of $4,470 for the taxable year 1998.

      The issues for decision are whether petitioner is entitled

to:   (1) Two dependency exemption deductions; (2) head of

household filing status; and (3) an earned income credit based on

two qualifying children.

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

The stipulations of fact and the attached exhibits are

incorporated herein by this reference.    Petitioner resided in

Orangeville, Pennsylvania, on the date the petition was filed in

this case.

      From March 1998 through December 1998, petitioner resided in

his sister’s apartment.    He resided with his sister, Susan

DeWald, his sister’s boyfriend, Ronald Yorks, and his sister’s

two children, Brianna DeWald and Cody Livingston, who turned 5

and 4 years old during 1998, respectively.    Petitioner and his

wife, who then was his girlfriend, would often babysit the

children while Ms. DeWald and Mr. Yorks were “on the road.”

Petitioner would also provide transportation for Cody, who

required special medical treatment, and for Brianna.

      During 1998, no rent was paid for the apartment by any of

the tenants because it was government subsidized housing.

Petitioner received combined wage income of $13,613 from

Workforce Solutions, Inc. and Travel Ports of America.    As a part
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of his employment, petitioner worked at Buck Horn Family

Restaurant.   At the time of trial, petitioner was still working

at this restaurant, earning approximately $25,000 per year.

During 1998, petitioner owned an automobile and was making

monthly payments with respect thereto.   Petitioner also made

monthly insurance payments with respect to this automobile and

with respect to an automobile owned by Ms. DeWald.   While he

resided with his sister, petitioner contributed to the payment of

telephone and electric bills, the purchase of food for the

household, and the purchase of clothing for the children.

     During 1998, Ms. DeWald was employed for a portion of the

year, earning $2,921.   In addition, she received food stamps

during the entire year which she used to purchase food for all

those residing in the apartment, and she received an unspecified

amount of welfare assistance.

     Petitioner filed an individual Federal income tax return for

taxable year 1998.   On this return, petitioner claimed head of

household filing status and claimed two dependency exemption

deductions for Brianna and Cody.   Petitioner also claimed an

earned income credit naming Brianna and Cody as qualifying

children; the return stated that they were petitioner’s foster

children and that they resided with petitioner for the entire

year.
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     In the statutory notice of deficiency, respondent changed

petitioner’s filing status to single, disallowed the dependency

exemption deductions, and disallowed the earned income credit.

     The first issue for decision is whether petitioner is

entitled to two dependency exemption deductions.

     Subject to various exceptions and limitations not applicable

here, a deduction generally may be allowed under section 151(a)

for each dependent of a taxpayer.    Sec. 151(a), (c)(1).   A

taxpayer’s niece or nephew generally is a dependent of the

taxpayer only if the taxpayer provides over half of the niece’s

or nephew’s support for the taxable year.     Sec. 152(a)(6).

     We are convinced that, during most of 1998, petitioner paid

various expenses for the children and had significant

responsibility in caring for them.     However, petitioner has

failed to provide the Court with any significant corroborative

evidence showing that he provided over half their support during

that year.   A major component of the children’s support was their

housing, but because petitioner was residing in his sister’s

apartment for which he paid no rent, the rental charge for the

apartment was provided by a source other than petitioner.       See

sec. 1.152-1(a)(2)(i), Income Tax Regs.     Furthermore, petitioner

only resided with Brianna and Cody for 9 to 10 months during

1998, and presumably was providing for none of their support

during the remaining 2 to 3 months.     Based on the record before
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us, we cannot find that petitioner paid over half of the support

for Brianna and Cody during 1998.

     The second issue for decision is whether petitioner is

entitled to head of household filing status.

     An unmarried taxpayer with no children or stepchildren is

entitled to head of household filing status only if the taxpayer

maintains as his household the principal place of abode, for more

than half the year, of at least one individual who entitles the

taxpayer to a dependency exemption deduction under section 151.

Sec. 2(b)(1).   Because petitioner did not establish that he

furnished over half the cost of maintaining the household, and

because neither Brianna nor Cody entitles petitioner to a

dependency exemption deduction for 1998, petitioner is not

entitled to head of household filing status for that year.

     The third issue for decision is whether petitioner is

entitled to an earned income credit based on two qualifying

children.

     Under section 32, an eligible taxpayer is allowed a credit

which is calculated as a percentage of the taxpayer’s earned

income, subject to certain limitations.   Sec. 32(a)(1).

Taxpayers who have qualifying children are allowed a larger

credit and are entitled to a credit at higher income levels than

are individuals without qualifying children.   Sec. 32(a), (b).

Because petitioner’s earned income was $13,613 during the year in
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issue, he is entitled to an earned income credit only if he had

qualifying children during that year.        Id.

     Under section 32, qualifying children of a taxpayer include

only (1) children of the taxpayer, or descendants of such

children; (2) stepchildren of the taxpayer; and (3) eligible

foster children of the taxpayer.    Sec. 32(c)(3)(A), (B).

Eligible foster children include only certain individuals who

have the same principal place of abode as the taxpayer for the

entire taxable year.   Sec. 32(c)(3)(B)(iii)(II).      Brianna and

Cody were neither children nor stepchildren of petitioner, and

they resided with petitioner for less than the entire taxable

year 1998.   Consequently, petitioner is not entitled to an earned

income credit for 1998.

     Reviewed and adopted as the report of the Small Tax Case

Division.

     To reflect the foregoing,

                                         Decision will be entered

                                 for respondent.
