                  T.C. Summary Opinion 2008-141



                      UNITED STATES TAX COURT



                DANITA J. LEONARD, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 12719-07S.                Filed November 4, 2008.



     Danita J. Leonard, pro se.

     Veena Luthra, for respondent.



     DAWSON, Judge:   This case was heard pursuant to the

provisions of section 7463 of the Internal Revenue Code in effect

when the petition was filed.1   Pursuant to section 7463(b), the




     1
       Unless otherwise indicated, section references are to the
Internal Revenue Code of 1986, as amended and in effect for the
year at issue, and Rule references are to the Tax Court Rules of
Practice and Procedure.
                               - 2 -

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 $5,953 deficiency in petitioner’s

Federal income tax for 2005.   After a concession by respondent,2

the issues for decision are whether petitioner is entitled to the

following:   (1) Dependency exemption deductions for a friend,

Belinda Pearson, and Ms. Pearsons’ two minor grandchildren, A.P.

and J.P.;3 (2) a child care credit for J.P.; (3) a child tax

credit and an additional child tax credit for A.P. and J.P.; (4)

an earned income credit; and (5) an education credit.

                            Background

     Some of the facts have been stipulated.   The stipulation and

accompanying exhibits are incorporated herein by this reference.

Petitioner resided in Virginia when the petition was filed.

     In 2005 petitioner was unmarried.   She was employed as a

correctional officer.   On her Federal income tax return for 2005,

which was prepared by H&R Block Eastern Enterprises I, petitioner

filed as a head of household, reported adjusted gross income of

$29,507, and claimed dependency exemption deductions of $3,200



     2
       Respondent concedes that petitioner is entitled to head of
household filing status, thus resulting in an increase in
petitioner’s standard deduction to $7,300 from $5,000.
     3
       The Court uses initials when referring to minor children.
See Rule 27(a)(3).
                                - 3 -

each for Belinda Pearson (Ms. Pearson) and for A.P. and J.P., who

were listed as petitioner’s foster children; a child care credit

of $810 for J.P.; a child tax credit of $89 and an additional

child tax credit of $1,911; an earned income credit of $1,208;

and an education credit of $44.

     Ms. Pearson is petitioner’s friend.    A.P. and J.P., who were

6 and 3 years of age in 2005, are the children of Sheniqua Lee

Pearson and Jason P. Pearson.   A.P. and J.P. are Ms. Pearson’s

grandchildren.   A.P. and J.P. are not petitioner’s foster

children.

     On March 10, 2004, the Juvenile and Domestic Relations

District Court of Williamsburg granted temporary legal and

physical custody of A.P. and J.P. to Ms. Pearson, which continued

until October 13, 2005, when a final order was entered giving

legal and physical custody of the grandchildren to her without

any visitation rights by their parents.

     During the entire year 2005 Ms. Pearson, A.P., and J.P.

lived in petitioner’s rented apartment.    The rent was $750 per

month.   Ms. Pearson, who is disabled, has lived in petitioner’s

household for about 11 years.   In 2005 her only source of income

was Social Security disability benefits of $7,908, which was used

in part to support herself and A.P. and J.P.
                               - 4 -

     J.P. attended child care at La Petite Academy in 2005 at a

total cost of $4,186.   Most payments for his care were made by

check by petitioner, but some were made by Ms. Pearson.

     Petitioner and Ms. Pearson pooled their financial resources

in 2005 to provide support for themselves and the two children,

A.P. and J.P.   Petitioner had adjusted gross income of $29,507

and Ms. Pearson had $7,908 from Social Security disability

benefits, for a total of $37,415.   Divided equally, the total

support for each occupant of the household was $9,354.    Neither

petitioner nor Ms. Pearson had any other sources of income to

support themselves and the children.   They received no support

from any Federal, State, or social service agencies.   Petitioner

and Ms. Pearson received no food stamps or rent subsidies.     The

father and mother of A.P. and J.P. provided nothing for the

children’s support.

     The arrangement for supporting members of the household was

that petitioner would pay the apartment rent and Ms. Pearson

would pay other expenses until her Social Security benefits were

consumed, and then petitioner’s salary would be used to pay for

all other expenses.   Thus, out of the total funds ($37,415)

available for the support of all household members, Ms. Pearson

provided 21 percent and petitioner provided 79 percent.

Therefore, petitioner provided more than 50 percent for the

support of Ms. Pearson, A.P., and J.P. in 2005.
                                - 5 -

     Ms. Pearson was not required to file a Federal income tax

return for 2005 and did not file one.

     Petitioner’s employer, Virginia Peninsula Regional Jail,

required her to take a college course once every 2 years in order

to maintain her position as a corporal.    She complied with the

job requirement by taking a college course in 2005 at a cost of

$218.    She claimed a lifetime learning credit of $44 on Form

8863, Education Credits (Hope and Lifetime Learning Credits), on

her 2005 income tax return.

     In the notice of deficiency respondent determined

petitioner’s filing status to be single rather than head of

household and reduced the standard deduction by $2,300; and

respondent disallowed the claimed dependency exemption deductions

for Ms. Pearson, A.P., and J.P., the child care credit for J.P.,

the child tax credit and additional child tax credit, the earned

income credit, and the education credit.

                              Discussion

     Petitioner has the burden of proving that she is entitled to

the claimed dependency exemption deductions and other tax

benefits at issue in this case.    See Rule 142(a).4




     4
       Petitioner has not claimed or shown that she meets the
requirements under sec. 7491(a) to shift the burden of proof to
respondent as to any factual issue relating to her liability for
tax.
                                - 6 -

1.   Dependency Exemption Deductions

      A taxpayer is entitled to claim a dependency exemption only

if the claimed dependent is a “qualifying child” or a “qualifying

relative” as defined under section 152(c) and (d).      Sec. 152(a).

      A qualifying child is defined as the taxpayer’s child,

brother, sister, stepbrother, or stepsister, or a descendant of

any of them.   Sec. 152(c)(1) and (2).     The term “child” includes

a legally adopted individual and a foster child placed in the

care of the taxpayer by an authorized placement agency or court

order.   Sec. 152(f)(1).   Neither A.P. nor J.P. is a qualifying

child because neither is related to petitioner and neither is her

adopted or foster child.    Thus, to be petitioner’s dependents

they must be qualifying relatives.      Likewise, Ms. Pearson must be

a qualifying relative to qualify as petitioner’s dependent.

      An individual who is not a qualifying child may still, under

certain conditions, qualify as a dependent if he or she is a

qualifying relative.   Sec. 152(a).     Under section 152(d)(1), a

qualifying relative is an individual:      (A) Who bears a qualifying

relationship to the taxpayer; (B) whose gross income for the year

is less than the section 151(d) exemption amount; (C) who

receives over one-half of his or her support from the taxpayer

for the taxable year; and (D) who is not a qualifying child of

the taxpayer or of any other taxpayer for the taxable year.
                               - 7 -

     Section 152(d)(2)(A)-(G) lists eight types of qualifying

relationships, seven of which involve various familial

relationships that do not cover petitioner’s claimed dependents.

The eighth type of qualifying relationship applies to an

individual, other than the taxpayer’s spouse, who has the same

principal place of abode as the taxpayer and is a member of the

taxpayer’s household for the taxable year.   Sec. 152(d)(2)(H).

In order for an individual to be considered a member of a

taxpayer’s household, the taxpayer must maintain the household,

and both the taxpayer and the individual must occupy the

household for the entire taxable year.   Sec. 1.152-1(b), Income

Tax Regs.   A taxpayer maintains a household when he or she

furnishes more than one-half of the expenses for the household.

See sec. 2(b); Rev. Rul. 64-41, 1964-1 C.B. (Part 1) 84.

     Respondent has conceded that petitioner qualifies for head

of household status and thereby has effectively conceded that

petitioner maintained the household for 2005.   Clearly, Ms.

Pearson, A.P., and J.P. occupied the household for all of 2005,

and petitioner furnished more than one-half of the expenses for

the household.   Accordingly, each of them satisfies the

qualifying relationship test pursuant to section 152(d)(2)(H).

     In addition, we conclude on this record that petitioner

provided over one-half of the support for Ms. Pearson, A.P., and

J.P. for 2005.   Furthermore, as members of the household, Ms.
                               - 8 -

Pearson, A.P., and J.P. are considered to have received equal

parts of petitioner’s contributions as their support.   See De La

Garza v. Commissioner, 46 T.C. 446 (1966), affd. per curiam 378

F.2d 32 (5th Cir. 1967).   Just to make ends meet and provide for

the financial survival of their household, petitioner paid most

of their personal living expenses.

     Respondent does not contend and the record does not show

that the gross income test is disputed.   However, respondent

points out that it is likely that the children petitioner claimed

as her dependents are the qualifying children of Ms. Pearson and

therefore are not petitioner’s qualifying relatives under section

152(d)(1)(D).   We disagree.

     Section 152(d) defines a qualifying relative for whom the

taxpayer may claim a dependency exemption deduction under section

151(c).   Section 152(d)(1)(D) provides that an individual is not

a qualifying relative of the taxpayer if the individual is a

qualifying child of any other taxpayer.   We conclude, as the

Commissioner has recently done in Notice 2008-5, 2008-2 I.R.B.

256, that a taxpayer otherwise eligible to claim a dependency

exemption deduction for an unrelated child is not prohibited by

section 152(d)(1)(D) from claiming the deduction if the child’s

parent (or other person with respect to whom the child is defined

as a qualifying child) is not required by section 6012 to file an

income tax return and does not file an income tax return or files

an income tax return solely to obtain a refund of withheld income
                                - 9 -

taxes.    Ms. Pearson, who as the grandmother of A.P. and J.P.

could have claimed them as her qualifying children, was not

required to file, and did not file, an income tax return for

2005.    See sec. 6012(a)(1)(A)(i).   One-half of her Social

Security disability benefits of $7,908 for that year was less

than the base amount provided by section 86(c)(1)(A), so none of

her benefits were includable in gross income pursuant to section

86(a)(1).    Thus, petitioner, not Ms. Pearson, was eligible to

claim and was entitled to the dependency exemption deductions for

A.P. and J.P. for 2005.5

2. Child Care Credit
     Section 21(a) and (b)(2) generally provides for a child care

credit with respect to employment-related expenses that are

incurred to enable the taxpayer to be gainfully employed,

including expenses to care for a “qualifying individual”.      With

exceptions not relevant here, a qualifying individual is

generally defined as an individual who is either a qualifying
child of the taxpayer (within the meaning of section 152(a)(1))

who has not turned 13 or a dependent of the taxpayer who is

physically or mentally incapable of caring for himself or herself

and shares the same place of abode with the taxpayer for more

than one-half of the taxable year.      Sec. 21(b)(1).




     5
       We note that respondent does not contend that A.P. and
J.P. were the qualifying children of their parents, who abandoned
them and provided nothing for their support.
                              - 10 -

     As previously discussed, J.P. was not a qualifying child of

petitioner within the meaning of section 152(a)(1), but only a

qualifying relative under section 152(a)(2).    Moreover,

petitioner does not allege and the record does not indicate that

either child is physically or mentally incapable of caring for

herself or himself.   Although petitioner did pay most of the

employment-related expenses for the care of J.P. at La Petite

Academy, which enabled her to be employed, the claimed credit

must be disallowed because he was not her qualifying child under

the law.   Accordingly, respondent’s determination on this issue

is sustained.

3. Child Tax Credit and Additional Child Tax Credit

     Section 24(a) authorizes a child tax credit with respect to

each qualifying child of the taxpayer.    A qualifying child means

an individual who meets the requirements of section 152(c) and

who has not attained the age of 17.    Sec. 24(c)(1).   Section

152(c) provides in pertinent part:

          (1) In general.--The term “qualifying child”
     means, with respect to any taxpayer for any taxable
     year, an individual--

                (A) who bears a relationship to the taxpayer
           described in paragraph (2),

                (B) who has the same principal place of abode
           as the taxpayer for more than one-half of such
           taxable year,

                (C) who meets the age requirements of
           paragraph (3), and
                                - 11 -

                 (D) who has not provided over one-half of
            such individual’s own support for the calendar
            year in which the taxable year of the taxpayer
            begins.

          (2) Relationship.--For purposes of paragraph
     (1)(A), an individual bears a relationship to the
     taxpayer described in this paragraph if such individual
     is--

                 (A) a child of the taxpayer or a descendant
            of such a child, or

                 (B) a brother, sister, stepbrother, or
            stepsister of the taxpayer or a descendant of any
            such relative.

Neither A.P. nor J.P. satisfies the section 152(c)(2)

relationship test.    Accordingly, they do not fit within the

meaning of qualifying child as defined by section 24(c).

Therefore, petitioner is not entitled to a child tax credit for

either A.P. or J.P. for 2005.

     Petitioner claimed an additional child tax credit on the

basis of A.P. and J.P. as qualifying children for taxable year

2005.    Subject to limitations on the basis of adjusted gross

income, a taxpayer is allowed for the year a child tax credit

with regard to each qualifying child of the taxpayer.    Sec.

24(a).    A portion of the child tax credit may be refundable as an

additional child tax credit if the taxpayer has an unused child

tax credit.    Sec. 24(d).

     Therefore, since there is no unused child tax credit,

petitioner is also not entitled to an additional child tax credit

for 2005 because A.P. and J.P. are not her qualifying children.
                                - 12 -

4. Earned Income Credit

       Section 32(a)(1) allows an “eligible individual” an earned

income credit against the individual’s income tax liability.

Section 32(a)(2) limits the credit allowed through a phaseout,

and section 32(b) prescribes different percentages and amounts

used to calculate the credit.    The limitation amount is based on

the amount of the taxpayer’s earned income whether the taxpayer

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

children.

       To be eligible to claim an earned income credit with respect

to a child, the taxpayer must establish that the child is a

qualifying child of the taxpayer as defined in section 152(c).

Sec. 32(c)(3)(A).    Neither A.P. nor J.P. is a qualifying child

under section 152(c), as previously discussed.

       Although petitioner is not eligible to claim an earned

income credit under section 32(c)(1)(A)(i) for one or more

qualifying children, she may be an eligible individual under

section 32(c)(1)(A)(ii).    For 2005 a taxpayer is eligible under

this subsection only if his or her adjusted gross income was less

than $11,750.    Rev. Proc. 2004-71, sec. 3.06, 2004-2 C.B. 970,

973.    Petitioner’s adjusted gross income for 2005 was $29,507.

Therefore, she is not eligible for an earned income credit for

2005.
                          - 13 -

5. Education Credit

Section 25A(c) provides in part:

SEC. 25A(c). Lifetime Learning Credit.--

       (1) Per taxpayer credit.--The Lifetime Learning
       Credit for any taxpayer for any taxable year is an
       amount equal to 20 percent of so much of the
       qualified tuition and related expenses paid by the
       taxpayer during the taxable year (for education
       furnished during any academic period beginning in
       such taxable year) as does not exceed $10,000
       ($5,000 in the case of taxable years beginning
       before January 1, 2003).

       (2) Special rules for determining expenses.--

   *        *         *      *       *       *         *

            (B) Expenses eligible for lifetime learning
            credit.--For purposes of paragraph (1),
            qualified tuition and related expenses shall
            include expenses described in
            subsection(f)(1) with respect to any course
            of instruction at an eligible educational
            institution to acquire or improve job skills
            of the individual.

Section 25A(f) provides in part:

SEC. 25A(f).    Definitions.--For purposes of this
section--

       (1) Qualified tuition and related expenses.--

            (A) In general.--The term “qualified tuition
            and related expenses” means tuition and fees
            required for the enrollment or attendance
            of--

                 (i) the taxpayer,

                 (ii) the taxpayer’s spouse, or

                 (iii) any dependent of the taxpayer with
                 respect to whom the taxpayer is allowed
                 a deduction under section 151,
                                  - 14 -

                 at an eligible educational institution for
                 courses of instruction of such individual at
                 such institution.

        *        *       *          *      *       *       *

            (2) Eligible educational institution.--The term
            “eligible education institution” means an
            institution--

                 (A) which is described in section 481 of the
                 Higher Education Act of 1965 (20 U.S.C.
                 1088), as in effect on the date of the
                 enactment of this section, and

                 (B) which is eligible to participate in a
                 program under title IV of such Act.

     In order to improve her job skills and maintain her position

as a corporal with the Virginia Peninsula Regional Jail,

petitioner took a college course at a qualified educational

institution in 2005 and paid the tuition expense of $218 as an

eligible student.    She had adjusted gross income of less than

$50,000 for that year and claimed an exemption for herself.      She

also reported a tax of $943 on line 28 of her Form 1040A, U.S.

Individual Income Tax Return.      She claimed a $44 education credit

on her return using the lifetime learning credit.      Respondent

disallowed the credit in the notice of deficiency on the ground

that “one or more dependent exemptions claimed on your return

have been disallowed.”    This obviously was referring to the

dependency exemption deductions claimed for the children, A.P.

and J.P.    That was incorrect.    Petitioner claimed the credit for

the college course she had taken.
                             - 15 -

     We conclude on these facts that petitioner has met the

requirements for the lifetime learning credit.   See sec. 1.25A-

4(c)(2), Example (1), Income Tax Regs.   Therefore, respondent’s

determination on this issue is not sustained.

     To reflect our disposition of the disputed issues and

respondent’s concession,

                                         Decision will be entered

                                   under Rule 155.
