                  T.C. Summary Opinion 2001-121



                     UNITED STATES TAX COURT



                 EUGENE P. MAYEUX, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 11551-99S.                    Filed August 7, 2001.



     James E. Shields, Jr., for petitioner.

     Susan Smith Canavello, for respondent.



     DINAN, 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.    The decision to be

entered is not reviewable by any other court, and this opinion

should not be cited as authority.   Unless otherwise indicated,

subsequent section references are to the Internal Revenue Code in

effect for the years in issue.
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     Respondent determined deficiencies in petitioner’s Federal

income taxes of $3,415 and $3,842 for the taxable years 1995 and

1996.

     The issues for decision are:   (1) Whether petitioner is

entitled to dependency exemption deductions for Dustin Faulkner

in 1995, for Kristion Faulkner in 1995 and 1996, and for Brittany

Faulkner in 1996; (2) whether petitioner is entitled to head of

household filing status in 1995 and 1996; and (3) whether

petitioner is entitled to earned income credits as an individual

with qualifying children in 1995 and 1996.

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

The stipulations of fact and the attached exhibits are

incorporated herein by this reference.   Petitioner resided in

Harvey, Louisiana, on the date the petition was filed in this

case.

     Petitioner began living with his girlfriend, Mendy Faulkner,

and Mendy’s two children, Dustin and Kristion Faulkner, when

petitioner was 17 years old in 1994.    Brittany Faulkner, daughter

of petitioner and Mendy, joined the household when she was born

in September 1996.   The family moved into an apartment with

petitioner’s mother, Josephine Mayeux, who also lived with

petitioner during both 1995 and 1996.    Petitioner and Mendy were

married on August 20, 1998.
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     Petitioner worked for Schwegmann Giant Super Markets in

1995, earning take-home pay of $7,138, and for Magnolia Marketing

Co. in 1996, earning take-home pay of $7,643.          In 1995,

petitioner spent approximately $2,000 from his own savings

account and received a monthly Social Security check of

approximately $270 until he reached age 18 in May.          In 1996,

petitioner received a Federal income tax refund in the amount of

$3,881, which included an overpayment of taxes from the prior

year in addition to a refunded earned income credit.          During 1995

and 1996, Josephine was receiving Social Security disability

payments of approximately $430 per month, and Mendy was receiving

combined food stamps and welfare benefits of approximately $490

per month.   Josephine helped petitioner and Mendy pay rent and

other household expenses.      The following are the approximate

total amounts of cash available to support the family in each

respective year:

                                              1995           1996
     From Eugene
        Take-home pay                         $7,138        $7,643
        Savings                                2,000          -0-
        Social Security benefits               1,350          -0-
        Tax refund and earned income credit     -0-          3,881
                                              10,488        11,524

     From other sources
        Josephine’s disability benefits       $5,160        $5,160
        Mendy’s food stamps and welfare        5,880         5,880
                                              11,040        11,040

In addition to cash outlays, petitioner provided the car which

Mendy and the children used for transportation.          Since the years

in issue, petitioner’s income from Magnolia Marketing has
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increased to $32,000 per year, and Mendy has stopped receiving

welfare benefits.

     Petitioner timely filed a Federal income tax return as a

head of household in each of the years in issue.   In 1995, he

reported income of $8,590, claimed exemption deductions for

himself, Dustin, and Kristion, and claimed the earned income

credit with Dustin and Kristion as qualifying children.    In 1996,

he reported income of $8,761, claimed exemption deductions for

himself, Kristion, and Brittany, and claimed the earned income

credit with Kristion and Brittany as qualifying children.   In the

statutory notices of deficiency, respondent for each year changed

petitioner’s filing status to single and disallowed the

dependency exemption deductions and earned income credit.

     Subject to limitations not applicable here, a deduction is

allowed under section 151(a) for each dependent of a taxpayer.

Sec. 151(a), (c)(1).   A child of the taxpayer, or an individual

whose principal place of abode is the taxpayer’s home and who is

a member of the taxpayer’s household, is a dependent of that

taxpayer if the taxpayer provides over half of his support for

the taxable year.   Sec. 152(a)(1), (9).

     Respondent makes several arguments supporting his

disallowance of the claimed dependency exemption deductions.

First, as to Dustin and Kristion, respondent argues that

petitioner is not their father.   However, a taxpayer need not be
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the parent of an individual in order for that individual to be

the taxpayer’s dependent under section 152(a)(9).

     Second, as to Dustin and Kristion, respondent argues that

petitioner does not meet the requirements of any of the various

provisions of section 152(e)(1)-(4).    Section 152(e), which

contains rules for divorced or separated parents treating one or

the other as having provided over half a child’s support, is

inapplicable in this case.   Section 152(e)(1) is inapplicable

because petitioner, not the children’s parents, provided over

half of their support, as discussed below.    Section 152(e)(2) is

inapplicable because nothing in the record indicates, nor does

respondent even suggest, that Mendy signed a written declaration

releasing her claim to the exemptions in favor of the biological

father.   Section 152(e)(3) is inapplicable because petitioner

provided over half of the children’s support, making a multiple

support agreement impossible.   See sec. 152(c)(1).   Finally,

section 152(e)(4) is inapplicable because there is no qualified

pre-1985 instrument involved in this case.

     Respondent’s third and final argument is that petitioner did

not provide over half of the support for Dustin, Kristion, or

Brittany.   However, the four witnesses at trial testified that

petitioner contributed more than half of such support, and we

find that the evidence supports this testimony.    Petitioner had

available to contribute to the payment of the children’s expenses
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an amount in cash equal to just under 50 percent of total

household income in 1995 and just over 50 percent in 1996.       He

also contributed the use of his car, the fair market value of

which must be taken into account.     Sec. 1.152-1(a)(2)(i), Income

Tax Regs.   Finally, petitioner provided corroborating evidence of

his payment of expenses for the children.     We find from the

testimony and other evidence that petitioner used his available

cash and property in providing over half of the support for the

children in each of the years in issue.     Petitioner is entitled

to the disallowed dependency exemption deductions.

     We need not address whether petitioner is entitled to head

of household filing status:   with the dependency exemption

deductions, petitioner had zero taxable income and zero tax

liability in each year with or without head of household filing

status.

     Under section 32,1 an eligible individual is allowed a

credit which is calculated as a percentage of the individual’s

earned income.   Sec. 32(a)(1).    Any taxpayer with a qualifying

child is an eligible individual.     Sec. 32(c)(1).   Taxpayers with

two or more qualifying children are entitled to a larger credit




     1
      We apply sec. 32 as it was in effect in the years in issue,
except sec. 32(c)(3), which was modified retroactively to taxable
years beginning after 1990 by the Internal Revenue Service
Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 6021,
112 Stat. 823.
                              - 7 -

than are taxpayers with fewer than two qualifying children.     Sec.

32(a) and (b).

     Respondent argues that petitioner had no qualifying children

in either 1995 or 1996 because no individual met the relationship

and residency requirements of section 32(c)(3).

     As is relevant here, the definition of a qualifying child

includes a child or an “eligible foster child” of the taxpayer

who has the same principal place of abode as the taxpayer for

more than half of the taxable year.   Sec. 32(c)(3)(A).2   An

eligible foster child is an individual who the taxpayer cares for

as the taxpayer’s own child and who has the same principal place

of abode as the taxpayer for the taxpayer’s entire taxable year.

Sec. 32(c)(3)(B)(iii).

     On his returns, petitioner claimed that Dustin and Kristion

were qualifying children in 1995, and that Kristion and Brittany



     2
      Respondent presumably is not arguing that Brittany cannot
be a qualifying child in 1996 merely because she was born in
September of that year. The Internal Revenue Service has taken
the position that the birth of an individual during the taxable
year does not affect the status of that individual as a
qualifying child, so long as she lived with the taxpayer during
the entire time she was alive. See the Internal Revenue
Service’s instructions accompanying Schedule EIC, Earned Income
Credit (Qualifying Child Information), and their Publication 596,
Earned Income Credit (as published currently and for the years in
issue). This position is in accordance with the legislative
history of sec. 32, which states that rules similar to those
governing head of household filing status should be adopted for
the sec. 32 residency requirements. H. Conf. Rept. 101-964, at
1037 (1990), 1991-2 C.B. 560, 564; sec. 1.2-2(c)(1), Income Tax
Regs.
                                 - 8 -

were qualifying children in 1996.    Brittany is petitioner’s

child; the testimony of the four witnesses at trial makes it

clear that petitioner cared for Dustin and Kristion as his own;

and all three of the children had the same principal place of

abode as petitioner during the relevant times in 1995 and 1996.

Therefore, they were all qualifying children in each of the

years.   We hold that petitioner is entitled to the earned income

credits disallowed by respondent.

     Reviewed and adopted as the report of the Small Tax Case

Division.

     To reflect the foregoing,

                                         Decision will be entered

                                 for petitioner.
