                         T.C. Summary Opinion 2015-39



                         UNITED STATES TAX COURT



                   MYRIAM L. CADET, Petitioner v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent



      Docket No. 9234-14S.                          Filed July 6, 2015.


      Myriam L. Cadet, pro se.

      Sean P. Deneault, for respondent.



                              SUMMARY OPINION


      GUY, Special Trial 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 decision to be entered is not reviewable by


      1
       Unless otherwise indicated, section references are to the Internal Revenue
Code, as amended and in effect for 2012, and Rule references are to the Tax Court
                                                                       (continued...)
                                         -2-

any other court, and this opinion shall not be treated as precedent for any other

case.

        Respondent determined a deficiency of $5,241 in petitioner’s Federal

income tax for 2012. Petitioner filed a timely petition for redetermination with the

Court pursuant to section 6213(a). At the time the petition was filed, petitioner

resided in Florida.

        The sole issue for decision is whether petitioner had “earned income” in the

amount she reported for the taxable year 2012, entitling her to an earned income

credit and an additional child tax credit under sections 32(a) and 24(d),

respectively.

                                     Background

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

facts and the accompanying exhibits are incorporated herein by this reference.

        Petitioner is married to Valvesien Lubin, and together they have three

minor children. In 2009 petitioner and the children moved to the United States

from Haiti. Petitioner testified that although Mr. Lubin resides in Haiti, he

transfers funds to her monthly to support the family.

        1
        (...continued)
Rules of Practice and Procedure. Monetary amounts are rounded to the nearest
dollar.
                                         -3-

      Petitioner testified that in 2012 she sold used clothing at a flea market.

Specifically, she testified that she purchased new clothing for her children and she

later sold the clothes when her children outgrew them. Petitioner testified that all

of her transactions were in cash. She did not maintain any written records related

to her purchases or sales of clothing. The record includes one receipt indicating

that petitioner paid $689 for a “Booth Rental”.

      Petitioner filed a Form 1040, U.S. Individual Income Tax Return, for 2012,

claiming head of household filing status and personal and dependent exemption

deductions for herself and her three children. Petitioner reported wages of $925

and net business income of $17,190. The latter amount originated on Schedule

C-EZ, Net Profit From Business, attached to petitioner’s return, in which she

reported gross receipts of $21,765 and business expenses of $4,575 attributed to

sales of clothing. Although petitioner reported self-employment tax of $2,111, she

claimed a $14 credit for taxes withheld on wages and earned income and

additional child tax credits of $5,891 and $2,085, respectively, which culminated

in her claim for a refund on an overpayment of $5,879.
                                            -4-

      Respondent issued a notice of deficiency to petitioner determining that she

failed to substantiate that she earned net business income of $17,190.2

Respondent determined that she had earned income of only $1,565, comprising

$925 of wages and $640 representing petitioner’s net income from self-

employment less the deductible portion of self-employment tax. Consistent with

these adjustments, respondent disallowed the entire additional child tax credit and

all but $709 of the earned income credit that petitioner had claimed for 2012,

reducing her overpayment to $638.3

                                        Discussion

      As a general rule, the Commissioner’s determination of a taxpayer’s liability

in a notice of deficiency is presumed correct, and the taxpayer bears the burden of

proving that the determination is incorrect. Rule 142(a); Welch v. Helvering, 290

U.S. 111, 115 (1933). Deductions and credits are a matter of legislative grace, and

the taxpayer bears the burden of proving entitlement to any deduction or credit

claimed. Deputy v. du Pont, 308 U.S. 488, 493 (1940).




      2
          Respondent “froze” (i.e., declined to process) petitioner’s claimed refund.
      3
          See sec. 6211(b)(4) (prescribing the Court’s jurisdiction in this setting).
                                         -5-

      Petitioner does not contend that the burden of proof should shift to

respondent pursuant to section 7491(a). In any event, there is no support in the

record for shifting the burden of proof in accordance with that provision.

      Section 32(a)(1) allows an eligible individual an earned income credit (EIC)

against his or her income tax. The EIC is computed as a percentage of the

taxpayer’s “earned income”. Id. The term “earned income” is defined in section

32(c)(2)(A) and includes wages and net earnings from self-employment. For

taxable years beginning after 2008 and before 2018, the credit percentage in the

case of a taxpayer with three or more qualifying children is 45%. Sec.

32(b)(3)(A).

      Section 24(a) provides that a taxpayer is allowed a credit against his or her

income tax for the taxable year with respect to each qualifying child of the

taxpayer for which the taxpayer is allowed a dependency exemption deduction

under section 151. The child tax credit normally cannot exceed the sum of the

taxpayer’s regular tax liability and the alternative minimum tax. See sec. 26(a).

Section 24(d) provides that a portion of the child tax credit, commonly referred to

as the additional child tax credit, is refundable and is computed (as relevant here)

under paragraph (1)(B)(i) as the amount equal to “15 percent of so much of the
                                         -6-

taxpayer’s earned income (within the meaning of section 32) which is taken into

account in computing taxable income for the taxable year as exceeds $10,000”.4

      A taxpayer claiming an EIC must establish that he or she had earned income

and the amount of that income. See, e.g., Blore v. Commissioner, T.C. Memo.

2000-326. On this record, we agree with respondent that petitioner failed to

substantiate that she earned net business income of $17,190 in 2012.

       Although we believe that petitioner sold some used clothing at a flea

market in 2012, she did not maintain any written records related to the purchase or

sale of the clothing. In short, there is no evidence in the record that would begin

to corroborate petitioner’s testimony that she received gross receipts of $21,765

and had business expenses of $4,575 related to her flea market activity.

      On this record, we sustain respondent’s determination that petitioner’s

earned income in 2012 did not exceed $1,565. It follows that respondent correctly

determined that petitioner was not entitled to an additional child tax credit and that

she was entitled to an EIC of only $709.5


      4
       Sec. 24(d)(4) provides: “In the case of any taxable year beginning after
2008 and before 2018, paragraph (1)(B)(i) shall be applied by substituting
‘$3,000’ for ‘$10,000’.”
      5
        Although petitioner testified that she was married to Mr. Lubin during the
year in issue, we assume, consistent with the determinations that respondent made
                                                                       (continued...)
                                         -7-

      To reflect the foregoing,


                                               Decision will be entered

                                       for respondent.




      5
        (...continued)
in the notice of deficiency, that petitioner was not considered to be “married”, see
secs. 32(d) and 7703, and was not obliged to file a joint return.
