                  T.C. Summary Opinion 2003-31



                     UNITED STATES TAX COURT



                AMANDA M. BEEGHLY, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 6809-01S.              Filed March 28, 2003.



     Leslie Book, James Fee, Alvin Changco, and

Irfan Dinani for petitioner.

     Jeffrey C. Venzie, for respondent.



     CARLUZZO, Special Trial Judge:   This case was heard pursuant

to the provisions of section 7463 of the Internal Revenue Code

in effect at the time the petition was filed.    Unless otherwise

indicated, subsequent section references are to the Internal

Revenue Code in effect for the years 1997 and 1998.   The decision

to be entered is not reviewable by any other court, and this

opinion should not be cited as authority.
                               - 2 -

     Respondent determined deficiencies of $2,313 and $2,863,

respectively, in petitioner’s 1997 and 1998 Federal income taxes.

The issue for decision for each year in issue is whether

petitioner is entitled to a dependency exemption deduction for

her daughter.1   The resolution of the issue for each year depends

upon whether petitioner was her daughter’s “custodial parent”,

within the meaning of section 152(e).

Background

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

the time the petition was filed, petitioner resided in St. Clair,

Pennsylvania.

     Petitioner married Roger M. Beeghly on December 2, 1993.

They have one child, a daughter, Shelby N. Beeghly, born June 20,

1994 (Shelby).   Petitioner and Mr. Beeghly separated in 1995 and

were divorced in 1999.   They did not live together at any time

during the last 6 months of either year in issue.

     On April 29, 1996, petitioner and Mr. Beeghly entered into a

separation agreement (the agreement) which provides in relevant

part:

          9. Custody and Visitation: The parties shall
     have shared legal and physical custody of * * *
     [Shelby]. * * * [Petitioner] shall enjoy partial
     physical custody for purposes of visitation as follows:


     1
       For each year, other adjustments are made in the notice of
deficiency. The parties agree, and the Court concurs, that under
the circumstances, resolution of all other adjustments follows
automatically from the resolution of the above-stated issue.
                         - 3 -

     a) alternate weekends from Friday at 8:00 a.m.
until Monday at 8:00 a.m. commencing the first weekend
after execution of this Agreement and continuing on
alternate weekends thereafter;

     b) from Wednesday at 8:00 a.m. until Friday at
8:00 a.m. on alternate weeks commencing the first
Wednesday after execution of this Agreement and
continuing on alternate weeks thereafter;

     c) from Monday at 8:00 a.m. until Wednesday at
8:00 a.m. on alternate weeks commencing the second
Monday after execution of this agreement and continuing
on alternate weeks thereafter;

     d) each Mother’s Day from 8:00 a.m. of said
Holiday to 8:00 a.m. the following day.

     * * * [Mr. Beeghly] shall enjoy partial physical
custody for purposes of visitation as follows:

     a) alternate weekends from Friday at 8:00 a.m.
until Monday at 8:00 a.m. commencing the second weekend
after execution of this Agreement and continuing on
alternate weekends thereafter;

     b) from Wednesday at 8:00 a.m. until Friday at
8:00 a.m. on alternate weeks commencing the second
Wednesday after execution of this Agreement and
continuing on alternate weeks thereafter;

     c) from Monday at 8:00 a.m. until Wednesday at 8:00
a.m. on alternate weeks commencing the first Monday after
execution of this agreement and continuing on alternate
weeks thereafter;

     d) each Father’s Day from 8:00 a.m. of said
Holiday to 8:00 a.m. of following day.

               *   *   *   *   *   *   *
     Physical custody of * * * [Shelby] on the
following holidays shall be divided between the parties
as they can hereafter determine: Thanksgiving Day,
Christmas Day, New Years Day, Easter, Memorial Day,
Independence Day, Labor Day and Memorial Day [sic].
                                - 4 -

     The agreement was superseded by an Order of Court, issued on

December 1, 1997, by the Court of Common Pleas of Somerset

County, Pennsylvania (the order), which provides in relevant

part:

          Accordingly, we enter this temporary order to the
     effect that * * * [petitioner and Mr. Beeghly] will
     have primary physical custody of * * * [Shelby] on a
     week-about basis with custody to be exchanged every
     Sunday at 12:00 noon * * * which will occur * * * on
     Sunday, January 4, 1998.

                    *   *   *    *      *   *   *

          It is further ordered that for the Christmas
     Holiday of 1997, * * * [Shelby] shall be in the primary
     physical custody of * * * [petitioner] beginning at
     8:00 a.m. on December 19, 1997, and continuing until
     9:00 p.m. on December 24, 1997. When * * * [Shelby]
     shall be delivered to * * * [Mr. Beeghly] by * * *
     [petitioner], who shall retain the child in his partial
     physical custody from 9:00 p.m. on December 24, 1997,
     until 12:00 noon on January 4, 1998, when the first
     exchange is scheduled to be made * * *.

The agreement is applicable until December 1, 1997.    From that

date throughout 1998, the order applies.

     Not counting the holidays specifically referred to in the

agreement (the 1997 holidays), the schedules set forth in the

agreement and order establish that during 1997 petitioner was to

have physical custody of Shelby for specific periods for a total

of 177 days, and Mr. Beeghly was to have physical custody of

Shelby for specific periods for a total of 182 days.    The

agreement is silent with respect to which parent was to have

physical custody of Shelby on each of the 1997 holidays.
                                 - 5 -

Nevertheless, the order provides that Mr. Beeghly was to have

physical custody of Shelby on Christmas Day that year.    With

respect to other 1997 holidays, petitioner had actual, physical

custody of Shelby on New Year’s Day, Easter, and Thanksgiving.

Mr. Beeghly had actual, physical custody of Shelby on Labor Day.

     For 1998, pursuant to the schedule set forth in the order,

petitioner was awarded physical custody of Shelby for specific

periods for a total of 182 days, and Mr. Beeghly was awarded

physical custody of Shelby for a specific period for a total of

183 days.2

     As relevant here, on her Federal income tax return for each

year in issue, petitioner computed her Federal income tax

liability taking into account the following: (1) Head of

household filing status and the appropriate standard deduction;

(2) a dependency exemption deduction for Shelby; (3) a child tax

credit (1998 only); (4) a credit for child care expenses; and

(5) an earned income credit computed by treating Shelby as a

qualifying child.

     For each year, respondent determined that petitioner was not

entitled to a dependency exemption deduction for Shelby because

she did not establish that she was Shelby’s custodial parent for

a greater portion of the year.    Other adjustments made in the

notice of deficiency need not be discussed.




     2
         There were 365 days in each year in issue.
                                - 6 -

Discussion

     In general, a taxpayer is entitled to a dependency exemption

deduction for each of the taxpayer’s dependents.     Sec. 151(c).

The term “dependent” includes a child of the taxpayer, over half

of whose support for the year is received, or treated as

received, from the taxpayer.    Sec. 152(a).   Because Shelby is

the child of parents who did not live together during the last

6 months of either year in issue, her support is determined

pursuant to section 152(e).    That section provides, subject to

certain conditions not in dispute and exceptions not applicable

here, that the child is treated as having received over half of

his or her support from the parent who has custody over the child

for a greater portion of the year.      That parent is referred to as

the “custodial parent”.   Because the child is treated as having

received over half of his or her support from the custodial

parent, generally the custodial parent is entitled to a

dependency exemption deduction for the child.     For purposes of

section 152(e), custody is determined by the terms of the most

recent custody decree, or if none, by the terms of a written

separation agreement, in effect at the relevant time.     Sec.

1.152-4(b), Income Tax Regs.    In this case the agreement and the

order establish the extent of petitioner’s legal and physical

custody of Shelby for 1997.    The order alone establishes the

extent of petitioner’s legal and physical custody of Shelby for

1998.
                               - 7 -

     Petitioner claims that she was Shelby’s custodial parent for

a greater portion of each year in issue and is therefore entitled

to the dependency exemption deductions here in dispute.     In

support of her position, petitioner relies upon section 1.152-

4(b), Income Tax Regs., which states:

          (b) Custody. “Custody”, for purposes of this
     section, will be determined by the terms of the most
     recent decree of divorce or separate maintenance, or
     subsequent custody decree, or, if none, a written
     separation agreement. In the event of so-called
     “split” custody, or if neither a decree or agreement
     establishes who has custody, or if the validity or
     continuing effect of such decree or agreement is
     uncertain by reason of proceedings pending on the last
     day of the calendar year, “custody” will be deemed to
     be with the parent who, as between both parents, has
     the physical custody of the child for the greater
     portion of the calendar year.

     Petitioner claims that she had “physical” custody of Shelby

for a greater portion of each year in issue and proceeds (as does

respondent for that matter) as though the actual, physical

custody of Shelby must be determined on a day-by-day basis for

each day of the years in issue.   Presumably, petitioner’s

position in this case is based upon the reference to “split

custody” in the regulation.   As petitioner construes the

regulation, in a “split”, joint, or shared custody arrangement,

the express terms of a custody instrument (written agreement or

order) establishing legal and/or physical custody are, in effect,

ignored and actual, physical custody must be determined even

though the custody instrument specifically allocates physical
                               - 8 -

custody of the child between parents for definite periods.     We

disagree and consider such a construction to be wholly

inconsistent with the underlying rationale for section 152(e).

See McClendon v. Commissioner, 74 T.C. 1, 3 (1980); Yancey v.

Commissioner, 72 T.C. 37, 40 (1979); Knight v. Commissioner, T.C.

Memo. 1992-710, affd. without published opinion 29 F.3d (9th Cir.

1994).

     To the extent that the agreement and the order contain

schedules that allocate Shelby’s physical custody between

petitioner and Mr. Beeghly for specific periods, the days

included within those periods are counted, respectively, as days

of physical custody for either petitioner or Mr. Beeghly for

purposes of section 152(e).   With the exception of the 1997

holidays, it is irrelevant which parent had actual, physical

custody of Shelby on any given day during the years in issue.

     As we view the matter, actual, physical custody of the child

is relevant for purposes of section 152(e) only if the “split”,

joint, or shared custody instrument does not allocate physical

custody between the parents for specific periods, but, as in this

case for the 1997 holidays, leaves it up to the parents of the

child to decide which will have physical custody on certain days.

Consequently, we turn our attention to the 1997 holidays.

     The parties agree that petitioner had actual, physical

custody of Shelby on New Year’s Day, Easter, and Thanksgiving.
                                - 9 -

The parties further agree that Mr. Beeghly had actual, physical

custody of Shelby on Labor Day.    The parties disagree as to which

parent had, or should be considered to have had, actual, physical

custody of Shelby on Memorial Day,3 Independence Day, and

Christmas.    We need not consider which parent had actual,

physical custody of Shelby on Christmas Day because the order

specifically awards physical custody to Mr. Beeghly.     Actual,

physical custody on that date, therefore, is, as noted above,

irrelevant.

     All things considered, for purposes of section 152(e)

custody of Shelby during 1997 is as follows:

                                Petitioner     Mr. Beeghly

     Days of physical custody      177             182
      per agreement or order

     Days of actual, physical        3               1
      custody on holidays (as
      agreed between the
      parties)

     Days of actual, physical           24         ---
      custody on holidays
      (disputed by the
      parties)
                                   ___             ___
          Total days               182             183




     3
         Shelby spent Memorial Day with petitioner’s mother.
     4
       We give petitioner the benefit of the doubt, as resolution
of the dispute between the parties for these two holidays is of
no consequence.
                               - 10 -

     Because Mr. Beeghly had custody of Shelby for a greater

portion of 1997, petitioner is not considered Shelby’s custodial

parent for that year.   Shelby, therefore, is not treated as

having received over half of her support from petitioner and does

not fit within the definition of a dependent for purposes of the

dependency exemption deduction here in dispute.       It follows that

petitioner is not entitled to a dependency exemption deduction

for Shelby for 1997, and respondent’s determination disallowing

that deduction is sustained.

     The order, through the schedule set forth therein, awards

physical custody of Shelby to petitioner for 182 days and to Mr.

Beeghly for 183 days during 1998.    Because petitioner was not

awarded custody of Shelby for a greater portion of 1998, she is

not Shelby’s custodial parent for that year.       As with 1997, it

follows that petitioner is not entitled to a dependency exemption

deduction for Shelby for 1998, and respondent’s determination in

this regard is sustained.

     Reviewed and adopted as the report of the Small Tax Case

Division.

     To reflect the foregoing,

                                      Decision will be entered

                                 for respondent.
