                  T.C. Summary Opinion 2005-107



                     UNITED STATES TAX COURT



         KEITH R. AND CHRISTINE M. VOGT, Petitioners v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 2431-04S.               Filed July 27, 2005.


     Keith R. and Christine M. Vogt, pro se.

     John W. Strate, for respondent.




     COUVILLION, Special Trial Judge:    This case was heard

pursuant to section 7463 in effect when the petition was filed.1

The decision to be entered is not reviewable by any other court,

and this opinion should not be cited as authority.


     1
      Unless otherwise indicated, subsequent section references
are to the Internal Revenue Code in effect for the year at issue,
and all Rule references are to the Tax Court Rules of Practice
and Procedure.
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       Respondent determined a deficiency of $1,973 in petitioners’

Federal income tax for the year 2001.    The issues for decision

are:    (1) Whether assistance payments paid to petitioners by the

State of California, Department of Social Services, In-Home

Supportive Services program (IHSS), to care for petitioners’

disabled son constitute gross income under section 61, and (2)

whether petitioners are entitled to the earned income credit

under section 32.

       Some of the facts were stipulated.   Those facts, with the

exhibits annexed thereto, are so found and made part hereof.

Petitioners’ legal residence at the time the petition was filed

was Fresno, California.

       Petitioners have a mentally disabled 17-year old son,

referred to herein as “NV”.    NV has suffered from encephalopathy,

an inflammation of the brain marked by varying degrees of

impairment of speech, cognition, orientation, and arousal, since

at least 1988.    In addition, he suffers from Ashburger’s

disorder, a form of autism, and obsessive compulsive disorder.

NV’s disorders often result in violent behavior; consequently, he

is generally heavily medicated.    As a result, NV requires

constant assistance and supervision throughout the day.      In or

before 1991, petitioner Keith Vogt (Mr. Vogt) left his job and

became the sole caregiver for NV while petitioner Christine Vogt
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(Mrs. Vogt) continued her employment in the legal department of a

local hospital.

     In 1991, IHSS determined that NV was entitled to receive

State assistance to pay for required nonmedical care.    Mr. Vogt

provided that care and, in accordance with the requirements of

the State agency, submitted bimonthly time sheets to IHSS

certifying the number of hours he furnished services to his son.

Mr. Vogt noted on all bimonthly time sheets submitted to IHSS the

number of hours he actually worked exceeded the number of hours

he was authorized to work.   Bimonthly checks were issued by IHSS

to petitioner after the submission of his time sheets.

Petitioner received $14,982.22 during 2001 from IHSS for such

services provided to his son.

     When Mr. Vogt first began receiving checks from IHSS, he

noticed there were no income taxes withheld.   He contacted the

State of California and was directed to a State auditor who

assured Mr. Vogt that the payments to him did not constitute

gross income.   Mr. Vogt also questioned an IHSS social worker who

visited the home periodically and was also assured that payments

to families for care provided by parents to a minor child in the

home did not constitute gross income.   Petitioners relied on this

advice even though the payments listed Mr. Vogt as an employee

and his son, NV, as his employer.   In addition, the IRS examined

petitioners’ 1991 Federal income tax return as to whether the
                                - 4 -

IHSS payments were income but, after conferring with petitioners,

concluded that the IHSS payments were not considered gross

income.

       In this case, respondent cites Bannon v. Commissioner, 99

T.C. 59 (1992), as controlling.    In Bannon, which involved

circumstances very similar to those in the present case, in which

a taxpayer gave her child round-the-clock total daily care, in

excess of the hours listed on the taxpayer’s biweekly timecard

and paid for by the IHSS, the Court analyzed the law in detail

and stated, id. at 66:

          Petitioner’s situation is sympathetic. She is to
          be lauded for the beneficence and compassion she
          has shown to her disabled daughter. But we
          cannot grant petitioner the relief she seeks. *
          * * We hold that petitioner’s receipt of
          payments under California’s in-home supportive
          services program did not constitute a welfare
          benefit to her and is therefore includable in her
          income for Federal income tax purposes.

       Although the Court has only previously addressed the

classification of IHSS payments as they apply to adult children,

California law makes no distinction between adult children and

minor children for purposes of IHSS payments.    See Miller v.

Woods, 148 Cal. App. 3d 862 (1983).     Live-in relatives, whether

caring for minor or adult children, receive the same level of

compensation from IHSS as nonrelated contract workers.     Id. at

877.    Furthermore, although parents of a minor child are required

by California law to volunteer their services to care for that
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child, the California legislature clearly drafted IHSS

legislation to allow compensation to a parent who leaves full-

time employment to care for his disabled minor child.     Cal. Fam.

Code sec. 3900 (West 2004); Cal. Welf. & Inst. Code sec. 12300(e)

(West Supp. 2005).2   Therefore, IHSS payments received for the

care of a minor child are not distinguishable under California

law from IHSS payments received for the care of an adult child.

     Petitioners contend that their 1991 Federal income tax

return was examined by the IRS, and they were allowed an

exclusion of the IHSS payment from gross income.     They have

relied on this audit by the IRS to exclude IHSS payments from

gross income on their Federal income tax returns for all

subsequent years.

     The Court is satisfied that petitioners, in the past, have

made good faith efforts to determine whether the subject IHSS

payments constituted gross income.     For at least 1 year, 1991,

petitioners were allowed the exclusion of these payments from



     2
      Cal. Welf. & Inst. Code sec. 12300(e) (West Supp. 2005)
reads, in part:
        Where supportive services are provided by a person
        having the legal duty pursuant to the Family Code
        to provide for the care of his or her child who is
        the recipient, the provider of supportive services
        shall receive remuneration for the services only
        when the provider leaves full-time employment or
        is prevented from obtaining full-time employment
        because no other suitable provider is available
        and where the inability of the provider to provide
        supportive services may result in inappropriate
        placement or inadequate care.
                                - 6 -

gross income in an examination of their Federal income tax return

by the IRS.    Unfortunately, however, each taxable year stands

alone, and the IRS may challenge in a succeeding year what was

condoned or agreed to in a former year.    Boatner v. Commissioner,

T.C. Memo. 1997-379 (citing Auto. Club v. Commissioner, 353 U.S.

180 (1957)), affd. 164 F.3d 629 (9th Cir. 1998).    Thus,

taxpayers’ returns must be in accord with the law even though the

Commissioner may have previously accepted a position not in

accordance with the law.    In addition, the Commissioner is not

bound by an agent’s representations.    Bornstein v. United States,

170 Ct. Cl. 576, 345 F.2d 558 (1965).   Authoritative tax law is

contained in statutes, regulations, and judicial decisions.

Zimmerman v. Commissioner, 71 T.C. 367 (1978), affd. 614 F.2d

1294 (2d Cir. 1979).    In accordance with the above discussion of

the nature of the IHSS payments, the Court concludes that these

payments constitute gross income.    Respondent, therefore, is

sustained.

     The last issue is petitioners’ claim to the earned income

credit under section 32 for NV and another son on their 2001

income tax return.    At trial, respondent agreed each of

petitioners’ children was a qualifying child with regard to the

age, residency, and relationship tests of section 32.    Respondent

disallowed the credit due to the income limitation.    Sec.

32(b)(2).    Respondent stated, at trial, that the earned income
                                - 7 -

credit is not available for taxpayers with income in excess of

$11,610.

     Whereas the credit was once limited to taxpayers who earned

less than $11,610, that limitation has since been raised.        Rev.

Proc. 2001-13, sec. 3, 2001-1 C.B. 337, 339.    For tax years

beginning in 2001, the “threshold phaseout amount” for a taxpayer

with two dependents is $13,090.    Id.   Taxpayers who have an

adjusted gross income of more than $13,090 in the taxable year

may only claim a portion of the earned income credit.      The

portion a taxpayer may claim is found in the tables published in

the instructions for the Form 1040 series.    Furthermore, a

taxpayer with two dependents whose adjusted gross income equals

$32,121 has reached the “completed phaseout amount”, and the

taxpayer may not claim the earned income credit.     Id.

     Because the payments to Mr. Vogt from IHSS constituted gross

income, petitioners earned in excess of $13,090 during 2001.

Therefore, petitioners have reached the “threshold phaseout

amount” and are only eligible to claim a portion of the earned

income credit for 2001.   They are not, however, precluded from

claiming the entire credit because they have two qualifying

children and their adjusted gross income was less than $32,121

for the tax year 2001.    Petitioners, therefore, are entitled to a

portion of the earned income credit on their 2001 tax return, as

determined by the instructions in the Form 1040 series.
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    Reviewed and adopted as the report of the Small Tax Case

Division.




                                          Decision will be entered

                                     under Rule 155.
