                  T.C. Summary Opinion 2009-163



                     UNITED STATES TAX COURT



                   GEORGE TABOH, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 17522-07S.              Filed October 21, 2009.



     George Taboh, pro se.

     Melanie M. Garger, for respondent.



     GOLDBERG, Special Trial Judge:   This case was heard pursuant

to the provisions of section 7463 of the Internal Revenue Code

(Code) in effect at the time the petition was filed.   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.   Unless otherwise indicated,

subsequent section references are to the Internal Revenue Code in
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effect for the year in issue, and all Rule references are to the

Tax Court Rules of Practice and Procedure.

     After a concession, the issues for decision are whether for

2006 petitioner is entitled to:    (1) A dependency exemption

deduction for his minor child, T.A.N.;1 (2) an earned income

credit; and (3) head of household filing status.

                            Background

     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

Massachusetts when he filed his petition.

     Petitioner earned a bachelor’s degree from Northeastern

University with a dual major in accounting and finance.

Petitioner worked full time as a database administrator until he

lost his job in 2001.   Since then petitioner has worked

itinerantly at temporary jobs.    During 2006 petitioner worked for

three different employers, collected unemployment benefits for

part of the year, and owned and operated an unincorporated

accounting and tax preparation service doing business as G T

Business Center.   Petitioner lived in a two-bedroom apartment

that the government subsidized in varying amounts according to

petitioner’s income at a given time.



     1
      The names of minor children are redacted.    See Rule
27(a)(3).
                               - 3 -

     Petitioner had a relationship with Stella Angwafo (Ms.

Angwafo).   They had a child together, T.A.N., born in 1998.

T.A.N. turned age 8 in 2006 and was a student in primary school.

Petitioner and Ms. Angwafo had separated before 2006.   According

to petitioner, a State court order (court order) awarded primary

physical custody of T.A.N. to Ms. Angwafo, required petitioner to

pay child support of $110 per week, and allowed petitioner

custody of T.A.N. for five nights out of every 2-week period.

     On November 28, 2006, petitioner and Ms. Angwafo signed a

new State court document entitled, “Agreement for Judgment”

(agreement).   Pertinent provisions in the agreement include:   (1)

Continuing to vest Ms. Angwafo with primary physical custody of

T.A.N.; (2) reducing petitioner’s custody of T.A.N. to three

nights out of every 2-week period; (3) requiring petitioner to

pay child support of $110 per week via wage assignment; and (4)

alternating the dependency exemption deduction for T.A.N. such

that petitioner may claim T.A.N. as a dependent for 2006 and all

subsequent even-numbered years “if [petitioner] is current in his

child support obligations” and entitling Ms. Angwafo

unconditionally to the dependency exemption deduction for 2007

and all subsequent odd-numbered years.

     Petitioner electronically filed his timely 2006 Federal

income tax return, listing his occupation as accounting and

reporting his own business, G T Business Center, and his own name
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as the paid preparer.    On the return petitioner reported adjusted

gross income of $17,369, consisting of:    (1) Wages of $10,489;

(2) interest of $10; (3) dividends of $11; (4) business loss from

G T Business Center of $361; and (5) unemployment compensation of

$7,220.   Petitioner claimed three exemptions for 2006, one for

himself and two for dependents:    R.T.D., a minor who is not his

biological child, and T.A.N.    The three exemptions resulted in a

total exemption deduction of $9,900.    In addition, petitioner

filed as a head of household, leading to a standard deduction of

$7,550.   These deductions resulted in zero taxable income for

petitioner for 2006.    Petitioner requested a refund of $5,228

arising from Federal income tax withholdings of $1,182, an earned

income credit (EIC) of $3,996, and a credit for Federal telephone

excise tax of $50.

     Petitioner attached to the return:    (1) Three Forms W-2,

Wage and Tax Statement, corresponding to his three jobs during

2006; (2) a Schedule EIC, Earned Income Credit Qualifying Child

Information, claiming R.T.D. and T.A.N. as qualifying children;

(3) a Schedule C, Profit or Loss From Business, for G T Business

Center; and (4) a preparer’s standard perjury statement stating

among other declarations that “the information contained in this

electronic tax return is the information furnished to me by the

taxpayer.”    Petitioner did not attach any other forms or

statements.
                                - 5 -

     Respondent examined petitioner’s 2006 Federal income tax

return, froze $3,996 of the refund to prevent payment of the EIC,

and issued a notice of deficiency for $4,957 consisting of the

following adjustments:   (1) Disallowing petitioner’s two

dependency exemption deductions; (2) adjusting petitioner’s

filing status from head of household to single; and (3)

disallowing the EIC because petitioner “did not establish that

[he was] entitled to the earned income credit”.    Subtracting the

EIC, respondent determined petitioner owed an additional tax of

$961 for 2006, plus interest.

     Petitioner timely petitioned this Court, stating that with

respect to T.A.N. for 2006 “[t]he child is a biological child to

the petitioner with documentation to support the claim.”

Petitioner conceded that he was not entitled to claim R.T.D. as a

dependent.

     Most of the trial focused on whether petitioner was in

arrears on his child support payments at the end of 2006.    The

Court received into evidence a “Child Support Allocation Record”

issued by the Commonwealth of Massachusetts Department of Revenue

Child Support Enforcement Division.     The record shows that during

the first part of 2006 until May 22 petitioner for the most part

complied with his weekly child support obligation.    Then

petitioner lost his job and did not make another payment until

September 5, 2006.   From September through December 2006
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petitioner followed a more varied pattern of payments, paying

approximately $180 biweekly.   Toward the end of the year

petitioner made a few additional payments, trying to catch up on

his delinquency.   Petitioner’s total child support obligation for

2006 was $5,720 ($110 per week times 52 weeks), of which the

child support allocation record shows that for the entire year

petitioner paid $5,393.58.   Petitioner acknowledged that he was

in arrears as of December 31, 2006, claiming that the total

arrearage was $326.42 ($5,720 minus $5,393.58) and that the

shortfall was due to his low income and the purchase of holiday

presents for T.A.N. in lieu of paying the end-of-the-year child

support arrearage.

     Respondent called Julie Lavin Flaherty as a witness.    Ms.

Flaherty is the keeper of the records and disclosure officer for

the Massachusetts Department of Revenue.    The Court received into

evidence a certified “Financial Summary Report” that Ms. Flaherty

provided from the Commonwealth of Massachusetts Department of

Revenue Child Support Enforcement System.   Though the Financial

Summary Report drew its information from the same database as the

child support allocation record, Ms. Flaherty testified to, and

the Financial Summary Report shows, that petitioner had an

arrearage of $579.83 as of December 31, 2006.   The difference of

$253.41 from petitioner’s figure arises because in January 2006

petitioner paid $186.97 for arrearage from a prior year and
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because petitioner paid $66.44 in penalties and interest for late

payments in 2006.

                             Discussion

I.    Burden of Proof

       In general, the Commissioner’s determination set forth in a

notice of deficiency is presumed correct, and the taxpayer bears

the burden of showing that the determination is in error.     Rule

142(a)(1); Welch v. Helvering, 290 U.S. 111, 115 (1933).     Under

section 7491(a) the burden may shift to the Commissioner

regarding factual matters if the taxpayer produces credible

evidence and meets the other requirements of the section.

Petitioner does not argue that he satisfied the elements for a

burden shift, but even if he did advance this argument, he did

not produce sufficient evidence to support a burden shift.

Accordingly, the burden of proof remains on petitioner.

II.    Dependency Exemption Deduction

       Deductions, including dependency exemption deductions, are a

matter of legislative grace, and taxpayers must satisfy the

statutory requirements for claiming the deductions.     INDOPCO,

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

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

      A taxpayer may claim a dependency exemption deduction for

each individual who is a dependent (as defined in section 152) of

the taxpayer for the year.    Sec. 151(a), (c).   Section 152(a)
                                - 8 -

defines the term “dependent” in pertinent part to include a

“qualifying child”.   A qualifying child includes the son or

daughter of a taxpayer who has the same principal place of abode

as the taxpayer for more than one-half of the year, who is under

age 19 as of the close of the year, and who has not provided over

one-half of his own support for the year.   Sec. 152(c).

     With respect to the principal place of abode requirement,

the court order and the agreement each awarded primary physical

custody to Ms. Angwafo.    From January 1 to November 28, 2006, Ms.

Angwafo had custody of T.A.N. for nine nights out of every 2

weeks (64 percent).   Once the new agreement went into effect on

November 28, 2006, Ms. Angwafo had custody of T.A.N. for 11

nights out of every 2 weeks (79 percent).   As a result, Ms.

Angwafo had custody of T.A.N. for more than one-half of the

nights of 2006; therefore, she is the parent entitled to claim a

dependency exemption deduction for T.A.N. for 2006.   Sec.

152(c)(1)(B).

     However, petitioner might still be entitled to claim T.A.N.

as a dependent for 2006.   As pertinent here, under section

152(e)(2), a noncustodial parent may claim the qualifying child

as a dependent if the custodial parent signs a written

declaration stating that she will not claim the child as a

dependent on her return for the year and the noncustodial parent

attaches the declaration to his Federal income tax return.
                               - 9 -

See Miller v. Commissioner, 114 T.C. 184, 189-191 (2000).      For

definitional purposes, the parent with whom the child resided for

the greater portion of the year is the custodial parent.    Sec.

152(e)(4)(A).   Since we have already found that T.A.N. resided

with Ms. Angwafo for the greater portion of 2006, Ms. Angwafo was

the custodial parent for 2006 and petitioner was the noncustodial

parent.

     To qualify for section 152(e)(2), the parents must meet

certain preliminary conditions found in section 152(e)(1):     the

child must receive “over one-half of the child’s support during

the calendar year from the child’s parents” where:   (1) The

parents are “divorced or legally separated under a decree of

divorce or separate maintenance,” “are separated under a written

separation agreement,” or lived “apart at all times during the

last 6 months of the calendar year,” and (2) the “child is in the

custody of 1 or both of the child’s parents for more than

one-half of the calendar year”.   Sec. 152(e)(1); King v.

Commissioner, 121 T.C. 245, 251 (2003) (holding that section

152(e)(2) is available even if the parents were never married).

For 2006 petitioner and Ms. Angwafo satisfied these initial

requirements.   They provided over one-half of T.A.N.’s support

for the year, they lived apart at all times during the year; and

T.A.N. was in the custody of one or the other parent during all

of 2006.
                              - 10 -

     With respect to the attached declaration, section

152(e)(2)(A) requires that the written declaration be “in such

manner and form as the Secretary may by regulations prescribe”.

The relevant regulation provides:

          Q-3 How may the exemption for a dependent child be
     claimed by a noncustodial parent?

          A-3 A noncustodial parent may claim the exemption
     for a dependent child only if the noncustodial parent
     attaches to his/her income tax return for the year of
     the exemption a written declaration from the custodial
     parent stating that he/she will not claim the child as
     a dependent for the taxable year beginning in such
     calendar year. The written declaration may be made on
     a form to be provided by the Service for this purpose.
     Once the Service has released the form, any declaration
     made other than on the official form shall conform to
     the substance of such form.

Sec. 1.152-4T, Q&A-3, Temporary Income Tax Regs., 49 Fed. Reg.

34459 (Aug. 31, 1984) (emphasis added).

     Thus a taxpayer may attach Internal Revenue Service Form

8332, Release of Claim to Exemption for Child of Divorced or

Separated Parents, or the taxpayer may attach a document that

conforms to its substance.   Miller v. Commissioner, supra at 189

(citing section 1.152-4T(a), Q&A-3, Temporary Income Tax Regs.,

supra).

     Petitioner did not attach Form 8332 or any other conforming

document to his return.   The failure to attach a declaration is

sufficient grounds by itself to deny the deduction because

section 152(e) requires strict compliance.   See Brissett v.

Commissioner, T.C. Memo. 2003-310 (holding that with respect to
                                - 11 -

attaching the declaration, “we are bound by the language of the

statute as it is written and the accompanying regulations”).

     Petitioner argues that under the agreement he is entitled

to claim T.A.N. as a dependent for 2006 and subsequent even-

numbered years.   Nonetheless, even if petitioner attached the

agreement to his return, the agreement does not conform in

substance to Form 8332 because it contains a condition; namely,

petitioner is entitled to the dependency exemption deduction

for T.A.N. only “if * * * [petitioner] is current in his child

support obligations”.    Petitioner’s conditional agreement stands

in contrast to the divorce agreement in Boltinghouse v.

Commissioner, T.C. Memo. 2003-134, where the Court held that only

a release that is unconditional meets the requirements of section

152(e).   The purpose of requiring an unconditional release is to

compel parents to resolve dependency disputes “‘without the

involvement of the Internal Revenue Service.’”     Bramante v.

Commissioner, T.C. Memo. 2002-228 (quoting H. Rept. 98-432 (art

2), at 1499 (1984)) (holding that for a written declaration to be

valid, the custodial parent’s release must be clear, unambiguous,

and unconditional).     Further, petitioner was in default on the

specific terms of the agreement.    We are not a court of equity,

and we may not intervene in matters beyond our jurisdiction.

Scarangella v. Commissioner, T.C. Memo. 1969-13, affd. 418 F.2d

228 (3d Cir. 1969).
                                  - 12 -

       In summary, the agreement was not attached, and for the

reasons stated above, the agreement does not conform in substance

to the written declaration that the Secretary prescribed and the

statute requires.2      Accordingly, T.A.N. was not petitioner’s

“qualifying child” under the exception of section 152(e)(2) or

any other provision of the Code.       We conclude that petitioner is

not entitled to claim a dependency exemption deduction for T.A.N.

for 2006, and we sustain respondent’s determination to that

effect.

III.       Earned Income Credit

       Individuals may be eligible for an earned income credit,

calculated as a percentage of earned income, if they meet certain

criteria.       Sec. 32(a)(1); Rowe v. Commissioner, 128 T.C. 13, 15

(2007).       Because petitioner conceded R.T.D. was not a qualifying

child for 2006 and because we have found that T.A.N. was not

petitioner’s qualifying child for 2006, the pertinent criterion

here is whether petitioner had earned income no greater than the

amount that the Code permits for eligible individuals with no

qualifying children.       See sec. 32(b)(2); Rowe v. Commissioner,

supra.       Section 32 indexes the ceilings such that for 2006, the

upper limitation (“completed phaseout amount”) of earned income



       2
      In future years petitioner might avoid the issue of whether
T.A.N. was his qualifying child by attaching to his Federal
income tax return a properly completed Form 8332 which Ms.
Angwafo has signed.
                                - 13 -

for individuals with no qualifying children was $12,120.     Sec.

32(j) (providing for an inflation adjustment); Rev. Proc.

2005-70, sec. 3.06(1), 2005-2 C.B. 979, 982 (announcing the

specific amount for 2006).

     Earned income for purposes of the EIC includes wages and

earnings from self-employment.    Sec. 32(c)(2)(A).   A net loss

from self-employment reduces earned income.    Sec. 1.32-2(c)(2),

Income Tax Regs.   Earned income excludes unemployment

compensation.    Id.   Earned income also excludes dividends and

interest.    Oppenheim v. Commissioner, 31 B.T.A. 563, 564-565

(1934) (earned income for determining credits means compensation

for personal services); Powers v. Commissioner, T.C. Memo. 2000-5

(similar), affd. without published opinion 234 F.3d 1269 (6th

Cir. 2000); Harroun v. Commissioner, a Memorandum Opinion of this

Court dated July 20, 1945 (similar, citing Oppenheim); Schomberg

v. United States, 48 AFTR 2d 81-5789, 81-2 USTC par. 9609 (E.D.

Cal. 1981) (investment proceeds from the sale of stock, interest,

and dividends are not earned income for EIC).

     Thus in 2006 petitioner had earned income of $10,128

($10,489 in wages minus the $361 loss from his business), which

is below that year’s pertinent complete phaseout amount of

$12,120.    Accordingly, petitioner qualifies for the earned income

credit for 2006 as an eligible individual with no qualifying
                                - 14 -

children.   The amount of the earned income credit will be

computed under Rule 155.

IV.   Filing Status

      As pertinent here, head of household filing status requires,

among other elements, the finding that the taxpayer’s residence

was the principal place of abode for a qualifying child for more

than one-half of the year.   Sec. 2(b)(1)(A); Rowe v.

Commissioner, supra at 16-17.    Because we have already found that

T.A.N. was not a qualifying child of petitioner for 2006 and

petitioner’s residence was not the principal place of abode for

T.A.N. for more than one-half of 2006, we sustain respondent’s

determination that petitioner is not entitled to head of

household filing status for 2006.

      To reflect our disposition of the issues,


                                          Decision will be entered

                                     under Rule 155.
