                            T.C. Summary Opinion 2017-27



                            UNITED STATES TAX COURT



                      JASON M. ROACH, Petitioner v.
             COMMISSIONER OF INTERNAL REVENUE, Respondent



      Docket No. 7430-15S.                             Filed April 27, 2017.



      Andrew Aleman, for petitioner.

      Molly H. Donohue and Janet F. Appel, 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, all section references are to the Internal
                                                                           (continued...)
                                          -2-

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

case.

        Respondent determined a deficiency of $3,140 in petitioner’s Federal

income tax for the taxable year 2012 and an accuracy-related penalty under section

6662(a) of $628. 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 Massachusetts.

        After filing an answer to the petition, respondent filed with the Court a

motion for leave to file out of time a first amendment to answer and lodged a first

amendment to answer. Although the Court directed petitioner to file an objection,

if any, to respondent’s motion for leave, he failed to do so. The Court

subsequently granted respondent’s motion for leave and filed respondent’s first

amendment to answer.

        Respondent’s first amendment to answer includes affirmative allegations

that petitioner failed to report certain wages, nonemployee compensation, and a

State income tax refund that he received in 2012 and that he failed to substantiate


        1
       (...continued)
Revenue Code, as amended and in effect for 2012, and all Rule references are to
the Tax Court Rules of Practice and Procedure. Monetary amounts are rounded to
the nearest dollar.
                                         -3-

an otherwise unidentified “above-the-line” deduction of $30,000. Consequently,

respondent asserted that petitioner was liable for an $11,017 increase in his

income tax deficiency for 2012 (resulting in a total deficiency of $14,157) and a

$2,071 increase in his accuracy-related penalty (resulting in a total penalty of

$2,699).

      After concessions,2 the issues remaining for decision are whether petitioner

is: (1) entitled to dependency exemption deductions, a child tax credit, and an

additional child tax credit for his two minor children and (2) liable for an

accuracy-related penalty under section 6662(a).

                                    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.




      2
        Petitioner stipulated that for 2012 he received but failed to report the
following items of income: wages of $3,598 and $1,677 paid to him by Alert
Ambulance Service, Inc., and Patriot Ambulance, Inc., respectively, nonemployee
compensation of $4,572 paid to him by Jay’s Landscaping, and a State income tax
refund of $975. The parties agree that petitioner is entitled to a reduced deduction
of $24,000 (petitioner had claimed a deduction of $30,000) on line 36 of his tax
return for 2012.
                                         -4-

I. General Background

      Petitioner has been a firefighter and a paramedic for about 16 years.

Stephanie Minardi, petitioner’s now former spouse, has worked as a paramedic for

about 12 years, and she became a registered nurse about 2 years ago.

      Petitioner and Ms. Minardi met at work in 2006. They married in October

2010 and have two minor children, J.M.R. and K.A.R.

II. Separation and Divorce Proceedings

      In July 2011 Ms. Minardi moved out of the marital home, and she filed a

complaint for divorce in August 2011. On March 15, 2012, the Trial Court of the

Commonwealth of Massachusetts, Probate and Family Court Department (family

court), issued a temporary order requiring petitioner and Ms. Minardi to comply

with a stipulation on temporary orders (stipulation). The stipulation recited that

they would share joint legal and physical custody of the children, were relieved of

any obligation to pay child support, and would follow a very detailed coparenting
                                         -5-

plan.3 In addition, petitioner was required to maintain health insurance for the

children.

      On May 15, 2012, Ms. Minardi’s attorney filed a civil complaint for

contempt against petitioner alleging, inter alia, that he had failed to comply with

the coparenting schedule described above and that he owed Ms. Minardi $1,335 as

reimbursement for childcare expenses. The record does not reflect how the

complaint was resolved.

      On March 8, 2013, petitioner and Ms. Minardi executed a separation

agreement and the family court entered a judgment of divorce nisi (which would

become absolute on June 7, 2013). Petitioner agreed to pay weekly child support

of $190 to Ms. Minardi. The separation agreement stated that petitioner and

Ms. Minardi would file separate tax returns beginning with the taxable year 2012




      3
       The coparenting plan required petitioner, over an eight-week cycle
beginning February 26, 2012, to provide care for the children as follows: (1)
during weeks 1 and 2, on Monday from 7:30 a.m. to 7 p.m., (2) during weeks 3
through 7, on Wednesday from 7:30 a.m. to Friday at 3 p.m., and (3) during week
8, on Monday from 7:30 a.m. to 7 p.m. If by the end of May 2012 petitioner and
Ms. Minardi had not mutually agreed to a different schedule, petitioner would
provide care for the children as follows: (1) during weeks 1 and 2, on Monday
from 7:30 a.m. to Tuesday at 7:30 a.m., (2) during weeks 3 through 7, on
Wednesday from 7:30 a.m. to Saturday at 7:30 a.m., and (3) during week 8, on
Monday from 7:30 a.m. to Tuesday at 7:30 a.m.
                                          -6-

and that Ms. Minardi was entitled “to claim the children as tax exemptions every

year.”

         The separation agreement provided that Ms. Minardi would have full legal

and physical custody of J.M.R. and K.A.R. and that petitioner was entitled to

visitation with the children for four hours on every fifth day of his eight-day work

cycle and at other times agreed upon by both parents. The separation agreement

stated in relevant part, however, that “[p]rior to the start of that visitation schedule,

the Husband shall visit the children initially for three (3) visits, which shall be for

an hour at first then progressing by adding an additional hour at each new visit,

and they shall occur at [a] McDonald’s Restaurant” and that “[i]n order to re-

establish a relationship with the children, the Husband shall make arrangements

with a mutually agreed-upon counselor to attend family counseling with the

children and visits shall begin when recommended by the counselor.”

III. Conflicting Testimony

         Petitioner, Karine Roach (petitioner’s current spouse), and Ms. Minardi

testified at trial. While petitioner’s and Ms. Minardi’s work schedules were quite

demanding, the testimony that petitioner and his current spouse offered about the

parental care that he provided to his children during the second half of 2011 and

throughout 2012 was directly contradicted by Ms. Minardi.
                                           -7-

         Petitioner was on call for his primary employer for two 24-hour periods

each week. Ms. Minardi was on a similar work schedule with her primary

employer, and she and petitioner both acknowledged working part time for at least

one additional employer. Ms. Minardi was also studying to become a registered

nurse.

         Petitioner testified that when Ms. Minardi left the marital home in July

2011, the children remained with him and that he provided care for them on

average about five days each week through December 2012. He explained that he

cared for the children when he was not working and that he relied on his girlfriend

(now Ms. Roach) and the wife of another firefighter to care for the children when

he was at work.

         Ms. Minardi testified that the children moved with her to a two-bedroom

apartment in July 2011, that petitioner had two brief visits with the children in the

latter part of 2011, and that he last visited with them in January 2012. Ms.

Minardi testified that petitioner did not comply with the coparenting schedules

(described in detail above), that she provided care for the children when she was

not working, and that she relied on her mother, her current husband, and a friend

to care for the children when she was at work.
                                         -8-

IV. Petitioner’s 2012 Tax Return

      On January 13, 2013, petitioner prepared and filed a Form 1040, U.S.

Individual Income Tax Return, for 2012. He claimed the filing status of married

filing separately, reported wage income of $76,198, claimed four dependency

exemption deductions (including exemptions for J.M.R. and K.A.R.),4 a child tax

credit of $2,404, and an additional child tax credit of $596.

V. Notice of Deficiency

      As previously indicated, respondent issued a notice of deficiency to

petitioner for the taxable year 2012. Respondent determined that petitioner is not

entitled to dependency exemption deductions for J.M.R. and K.A.R., reduced the

child tax credit that petitioner claimed to $1,000, and disallowed the additional

child tax credit.

                                     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


      4
       The parties stipulated that Ms. Minardi did not execute a Form 8332,
Release/Revocation of Release of Claim to Exemption for Child by Custodial
Parent, releasing her right to claim J.M.R. and K.A.R. as dependents for the
taxable year 2012.
                                          -9-

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).

      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.

I. Dependency Exemption Deduction

      An individual is allowed as a deduction an exemption for “each individual

who is a dependent (as defined in section 152) of the taxpayer for the taxable

year.” Sec. 151(a), (c). Section 152(a) defines the term “dependent” to include “a

qualifying child” or “a qualifying relative”.

      Generally, a “qualifying child” must (1) bear a specified relationship to the

taxpayer (e.g., be the taxpayer’s child), (2) have the same principal place of abode

as the taxpayer for more than one-half of the taxable year, (3) meet certain age

requirements, (4) not have provided over one-half of his or her own support for the

taxable year, and (5) not have filed a joint return for that year. Sec. 152(c)(1).

      Section 152(d) generally defines a “qualifying relative” as an individual

(1) who bears a specified relationship to the taxpayer (e.g., is the taxpayer’s child),

(2) whose gross income is less than the exemption amount, (3) with respect to
                                        -10-

whom the taxpayer provides over one-half of the individual’s support, and (4) who

is not a qualifying child of such taxpayer or any other taxpayer.

      At trial petitioner and Ms. Minardi offered contradictory accounts about the

parental care that they provided to the children in 2012. Although petitioner

testified that the children resided with him on average about five days per week

that year, the separation agreement that he executed in March 2013 is strong

evidence that he did not have a meaningful parental relationship with the children

in 2012. In particular, the settlement agreement limited the time petitioner could

visit with the children, stated that he needed to take measured steps to reestablish

his relationship with them, and directed that he consult with a counselor to

determine how best to proceed. On this record, we conclude that petitioner failed

to show that J.M.R. and K.A.R. shared the same principal place of abode with him

for more than one-half of the taxable year 2012. Therefore, we sustain

respondent’s determination that J.M.R. and K.A.R. were not petitioner’s

qualifying children within the meaning of section 152(c).

      Although the record indicates that petitioner was required to support J.M.R.

and K.A.R. in 2012, there is no evidence of the amount of support that he actually

provided to them that year. Because we are unable to determine that petitioner

provided over one-half of J.M.R.’s and K.A.R.’s support during the year in issue,
                                          -11-

we conclude that they were not petitioner’s qualifying relatives within the

meaning of section 152(d).

         Section 152(e) provides special rules for parents who are divorced,

separated under a written separation agreement, or living apart at all times during

the last six months of the calendar year. Under section 152(e)(1) and (2), a

noncustodial parent may treat a child as a qualifying child or a qualifying relative

if the custodial parent signs a written declaration, conforming with Form 8332,

indicating that he or she will not claim the child as a dependent for that taxable

year. See Armstrong v. Commissioner, 139 T.C. 468, 472 (2012), aff’d, 745 F.3d

890 (8th Cir. 2014). Section 152(e)(4)(A) defines the term “custodial parent” as

the parent “having custody [of a child] for the greater portion of the calendar

year.”

         On this record, we conclude that the children were in Ms. Minardi’s custody

for the greater portion of the calendar year 2012 and therefore she was the

childrens’ custodial parent. It follows that petitioner was the “noncustodial

parent” of the children. See sec. 152(e)(4)(B). Because Ms. Minardi did not

execute a Form 8332 or any other written statement conforming to its substance,

we sustain respondent’s determination that petitioner is not entitled to dependency

exemption deductions for J.M.R. and K.A.R. for 2012.
                                         -12-

II. Child Tax Credit and Additional Child Tax Credit

      Section 24(a) provides a tax credit with respect to each qualifying child of

the taxpayer for whom the taxpayer is allowed a deduction under section 151.

Section 24(c)(1) defines the term “qualifying child” as a “qualifying child of the

taxpayer (as defined in section 152(c)) who has not attained age 17.” Section

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

additional child tax credit, may be refundable. As previously discussed, neither

K.A.R. nor J.M.R. is a “qualifying child” of petitioner as defined in section 152

for the taxable year 2012. Consequently, we sustain respondent’s determination

disallowing the portions of the child tax credit and additional child tax credit in

dispute.

III. Accuracy-Related Penalty

      Section 6662(a) and (b)(1) and (2) imposes an accuracy-related penalty

equal to 20% of the amount of any underpayment of tax that is due to the

taxpayer’s negligence or disregard of rules or regulations or that is attributable to

any substantial understatement of income tax. By definition, an understatement

means the excess of the amount of the tax required to be shown on the return over

the amount of the tax imposed which is shown on the return, reduced by any

rebate. Sec. 6662(d)(2)(A). An understatement is substantial in the case of an
                                        -13-

individual if the amount of the understatement for the taxable year exceeds the

greater of 10% of the tax required to be shown on the return or $5,000. Sec.

6662(d)(1)(A).

      With respect to an individual taxpayer’s liability for any penalty, section

7491(c) places on the Commissioner the burden of production, thereby requiring

the Commissioner to come forward with sufficient evidence indicating that it is

appropriate to impose the penalty. Higbee v. Commissioner, 116 T.C. 438, 446-

447 (2000). Once the Commissioner meets his burden of production, the taxpayer

must come forward with persuasive evidence that the Commissioner’s

determination is incorrect. Id. at 447; see Rule 142(a); Welch v. Helvering, 290

U.S. at 115. The Commissioner, however, bears the burden of proof in respect of

an increased penalty asserted in an amendment to answer. Rule 142(a)(1).

      Petitioner improperly claimed dependency exemption deductions, a child

tax credit, and an additional child tax credit for J.M.R. and K.A.R. for the taxable

year 2012 in disregard of applicable statutory provisions. Additionally, petitioner

conceded (without explanation) that he had failed to report several items of

taxable income and that he is not entitled to a portion of a deduction that he

claimed on his tax return, resulting in an understatement of income tax which

appears to be in excess of both 10% of the tax required to be shown on the return
                                        -14-

and $5,000. Sec. 6662(d)(1)(A). Consequently, we find that respondent met his

burden of production in respect of the penalty determined in the notice of

deficiency and his burden of proof in respect of the increased penalty asserted in

the amendment to answer.

      Petitioner prepared and filed his tax return for the year in issue. He did not

offer a defense to the imposition of an accuracy-related penalty in this case other

than to assert that respondent had erred in determining a deficiency. That matter

having been resolved against him, respondent’s determination that petitioner is

liable for an accuracy-related penalty under section 6662(a) is sustained.

      To reflect the foregoing,


                                               Decision will be entered

                                       under Rule 155.
