                  T.C. Summary Opinion 2005-142



                     UNITED STATES TAX COURT



               PACITA PALERMO REYES, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 9659-04S.             Filed September 29, 2005.


     Pacita Palermo Reyes, pro se.

     Aaron D. Gregory, 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.    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, and all Rule references are to the

Tax Court Rules of Practice and Procedure.
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     Respondent determined a deficiency in petitioner’s Federal

income tax of $3,778 for the taxable year 2002.

     The issues for decision are:    (1) Whether petitioner is

entitled to dependency exemption deductions for her

grandchildren, CME and CJE;1 (2) whether petitioner is entitled

to head-of-household filing status; (3) whether petitioner is

entitled to an earned income credit; and (4) whether petitioner

is entitled to child tax credits of $923 for taxable year 2002.

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

The stipulation of facts and the attached exhibits are

incorporated herein by this reference.    Petitioner resided in

Newport News, Virginia, on the date the petition was filed in

this case.

                            Background

     Both CME and CJE are petitioner’s grandchildren.    Maria

Embry (Ms. Embry) is petitioner’s daughter and the mother of both

CME, born in 1987, and CJE, born in 1994.    Michael Embry, Sr.

(Mr. Embry) is the father of CJE.    CME’s father was not

identified in the record.   In addition to CJE, Ms. Embry and Mr.

Embry have three other children.    Ms. Embry and Mr. Embry were

legally separated in 2001 and remained legally separated during

the 2002 tax year.




     1
      The Court uses only the minor children’s initials.
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     For the year in issue, petitioner earned $25,237 in taxable

wages.   Petitioner resided, by herself, in a three-bedroom house

with an attached garage, which was converted into a fourth

bedroom and a bathroom.

     Ms. Embry lived in a three-bedroom house with her five

children.   Ms. Embry did not own a car.   She was unemployed, and

she received $900 per month in child support from Mr. Embry.     Ms.

Embry’s children were covered by Mr. Embry’s medical insurance

program through the U.S. Navy.    Ms. Embry paid $540 per month for

rent, during taxable year 2002, and received approximately $300

per month in food stamp assistance, along with free school

lunches for some of her children, including CME and CJE.

     In the year at issue, petitioner provided financial

assistance to Ms. Embry and petitioner’s grandchildren.

Petitioner paid for the telephone service in Ms. Embry’s house,

which was registered in petitioner’s name.    At various times

throughout 2002, petitioner bought clothing, shoes, and dinners

for all of her grandchildren.    Further, petitioner paid for and

accompanied her grandchildren when they traveled to Busch

Gardens.    Petitioner provided rides to stores and to recreational

events because Ms. Embry did not own a car.    Periodically,

petitioner bought laundry detergent, dishwashing liquid,

toothpaste, paper towels, toilet paper, and many other household

necessities for Ms. Embry and petitioner’s grandchildren.      During
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taxable year 2002, petitioner opened guardian savings accounts

for CME and CJE.   As of December 31, 2002, the balances of these

accounts were $722.40 and $206.23 for CME and CJE, respectively.

Further, petitioner gives her grandchildren monthly cash

allowances.   Petitioner not only provides Ms. Embry and

petitioner’s grandchildren with monetary and material items but

also provides “love, care, and understanding to help them live a

normal and happy life with complete confidence in themselves and

high regard and respect for their well being.”

     On March 2, 2003, petitioner went to the Internal Revenue

Service office in Hampton, Virginia, to receive assistance in

preparing her 2002 Federal income tax return.    In fact,

petitioner’s return was prepared by an Internal Revenue Service

employee.   Petitioner voluntarily signed the 2002 Federal income

tax return and timely filed said return on or about March 21,

2003.

     On her return, petitioner claimed CME and CJE as dependents

and claimed the resulting dependency exemption deductions, as

well as child tax credits of $923 and an earned income credit.

Further, petitioner claimed head-of-household filing status on

her 2002 Federal income tax return.

     During the 2002 taxable year, although CME and CJE often

visited petitioner’s home on weekends and holidays, both CME and

CJE lived with Ms. Embry in her home.
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     Respondent issued a notice of deficiency to petitioner in

which respondent disallowed the dependency exemption deductions,

child tax credit, and earned income credit, and changed

petitioner’s filing status to single.

     On November 24, 2004, respondent’s counsel sent petitioner a

letter requesting that she provide respondent with information

relevant to respondent’s determination with respect to her

liabilities in this case.   The information respondent requested

from petitioner was as follows:   (a) Any and all documentation

substantiating that petitioner is entitled to head-of-household

filing status for 2002; particularly any information supporting

that a “qualifying person” lived with her in her home for more

than half of the 2002 tax year; (b) any and all documentation

substantiating that petitioner is entitled to either or both of

the two dependent exemption deductions claimed on her 2002 tax

return, particularly any information supporting that she provided

more than half of each claimed dependent’s total support for the

2002 tax year; (c) any and all documentation substantiating that

petitioner is entitled to claim the earned income credit as shown

on her 2002 tax return, particularly any information supporting

that a “qualifying child” or children lived with her in her home

for more than half of the 2002 tax year; (d) any and all

documentation substantiating that petitioner is entitled to the

child tax credit for the 2002 tax year; (e) any and all
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documentation substantiating that petitioner is entitled to the

additional child tax credit for the 2002 tax year; and (f) any

other additional documentation that may be relevant.

       Petitioner did not respond to respondent’s counsel’s letter

and did not provide any additional information.    However,

petitioner contends that documentation already in the record of

this case substantiates her claims on her 2002 income tax return.

The documentation, to which petitioner refers, consists of:      (1)

Notarized Certification from her daughter, Ms. Embry, that

petitioner is the only person entitled to claim CJE as a

dependent; (2) two pages of what appears to be a separation

agreement between Mr. Embry and Ms. Embry; however, these pages

are not signed by Ms. Embry; and (3) copies of Langly Federal

Credit Union statements for the period October 1 through December

31, 2002, establishing that she funded a guardian account for

CJE.

                             Discussion

       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).    In pertinent part, Rule 142(a)(1)

provides the general rule that “The burden of proof shall be upon

the petitioner”.    In certain circumstances, however, if the

taxpayer introduces credible evidence with respect to any factual

issue relevant to ascertaining the proper tax liability, section
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7491 places the burden of proof on the Commissioner.    Sec.

7491(a)(1); Rule 142(a)(2).   Credible evidence is “the quality of

evidence which, after critical analysis, * * * [a] court would

find sufficient * * * to base a decision on the issue if no

contrary evidence were submitted.”2    Baker v. Commissioner, 122

T.C. 143, 168 (2004); Higbee v. Commissioner, 116 T.C. 438, 442

(2001).   Section 7491(a)(1) applies only if the taxpayer complies

with substantiation requirements, maintains all required records,

and cooperates with the Commissioner for witnesses, information,

documents, meetings, and interviews.    Sec. 7491(a)(2).   Although

neither party alleges the applicability of section 7491(a), we

conclude that the burden of proof has not shifted to respondent

with respect to any of the issues in the case at bar because

petitioner has not complied with the requirements to substantiate

the items in dispute.   Therefore, petitioner bears the burden of

showing that she is entitled to claim dependency exemption

deductions for CME and CJE, that she is entitled to head-of-

household filing status, that she is entitled to an earned income

credit for taxable year 2002, and that she is entitled to claim

child tax credits for CME and CJE for taxable year 2002.




     2
      We interpret the quoted language as requiring the
taxpayer’s evidence pertaining to any factual issue to be
evidence the Court would find sufficient upon which to base a
decision on the issue in favor of the taxpayer. See Bernardo v.
Commissioner, T.C. Memo. 2004-199.
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     Moreover, deductions are a matter of legislative grace and

are allowed only as specifically provided by statute.     INDOPCO,

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

Co. v. Helvering, 292 U.S. 435, 440 (1934).

A.   Dependency Exemption Deductions

     A taxpayer may be entitled to claim as a deduction an

exemption amount for each of his or her dependents, over half of

whose support is provided by the taxpayer.     Secs. 151(c)(1),

152(a).   A dependent includes a grandchild.    Sec. 152(a)(1).

     As to the support test, a taxpayer generally must provide

more than one-half of a claimed dependent’s support for the

calendar year in which the taxable year of the taxpayer begins.

Sec. 152(a), (c).   In order to satisfy this test, a taxpayer must

establish the total support expended on behalf of the claimed

dependents from all sources for the year and demonstrate that she

provided more than half of this amount.   See Archer v.

Commissioner, 73 T.C. 963, 967 (1980); Blanco v. Commissioner, 56

T.C. 512, 514-515 (1971).

     In the present case, there is an absence of evidence

relating to the total amount of support as well as petitioner’s

share of support.   While the record is replete with evidence of

petitioner being a loving and caring grandmother and her

purchases of numerous household necessities, we cannot conclude

on this record the amount of the total support for CME and CJE
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nor the amount of support provided by petitioner.   Therefore,

respondent is sustained on this issue.

2.   Head of Household

     Section 1(b) imposes an income tax rate on individuals

filing as head of household.   As relevant herein, section 2(b)

defines “head of household” as an unmarried individual who

maintains as her home a household that for more than one-half of

the taxable year constitutes the principal place of abode of a

person who is a dependent of the taxpayer, if the taxpayer is

entitled to a deduction for the taxable year for that dependent

under section 151.

     The Court has sustained respondent’s determination

disallowing the claimed dependency exemption deductions, and, as

a result, petitioner is not entitled to head-of-household filing

status for 2002.   Further, the record shows that CME and CJE did

not live with petitioner for more than one-half of the taxable

year 2002.   Thus, respondent’s determination that petitioner is

not entitled to head-of-household filing status is sustained.

3.   Earned Income Credit

     Section 32(a) provides for an earned income credit in the

case of an eligible individual.   Section 32(c)(1)(A)(i), in

pertinent part, defines an “eligible individual” as any

individual who has a qualifying child for the taxable year.    A

qualifying child is one who satisfies a relationship test, a
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residency test, and an age test.   Sec. 32(c)(3).   For the tax

year in issue, the residency test required a qualifying child to

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

than one-half of such taxable year”.    Sec. 32(c)(3)(A)(ii).   As

previously stated, the record shows that CME and CJE did not live

with petitioner for more than one-half of the taxable year 2002.

We find that CME and CJE fail the residency test of section

32(c)(3)(A)(ii); therefore, we need not, and do not, decide

whether they satisfy the relationship test or age test under

section 32(c)(3).   Thus, respondent is sustained on this issue.

4.   Child Tax Credits

     Finally, we consider the child tax credits.    A taxpayer may

be entitled to a credit against tax with respect to each

“qualifying child”.   Sec. 24(a)   The plain language of section 24

established a three-pronged test to determine whether a taxpayer

has a qualifying child.   If one of the qualifications is not met,

the claimed child tax credit must be disallowed.    The first

element of the three-pronged test requires that a taxpayer must

have been allowed a deduction for that child under section 151.

Sec. 24(c)(1)(A).

     As previously stated, the Court has sustained respondent’s

determination that petitioner is not entitled to dependency

exemption deductions for CME and CJE.    Thus, petitioner fails the

first prong of the test of section 24.    The Court sustains
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respondent’s determination regarding the child tax credits under

section 24.

     Reviewed and adopted as the report of the Small Tax Case

Division.


                                   Decision will be entered

                              for respondent.
