                  T.C. Summary Opinion 2006-108



                     UNITED STATES TAX COURT



 MICHAEL E. AND LAURA A. TAYLOR, Petitioners v. COMMISSIONER OF
                  INTERNAL REVENUE, Respondent



     Docket No. 12423-04S.              Filed July 17, 2006.



     Ronald W. Blasi and Michael L.P. Jacobs (specially

recognized), for petitioners.

     Brenda M. Fitzgerald, for respondent.


     POWELL, Special Trial Judge:    This case was heard pursuant

to section 74631 of the Internal Revenue Code in effect at the

time the petition was filed.    The decision to be entered is not




     1
          Unless otherwise indicated, subsequent section
references are to the Internal Revenue Code in effect for the
year in issue.
                                - 2 -

reviewable by any other court, and this opinion should not be

cited as authority.

     The term petitioner refers to Michael E. Taylor.   Respondent

determined a deficiency of $1,296 in petitioners’ 2002 Federal

income tax and a penalty under section 6662 of $259.20.   The

issues are:   (1) Whether petitioners are entitled to a dependency

exemption deduction for petitioner’s minor child from a previous

marriage; (2) whether petitioners are entitled to a child tax

credit; (3) whether petitioners are entitled to an additional

child tax credit; (4) whether petitioners are entitled to the

earned income tax credit; and (5) whether petitioners are liable

for the section 6662 penalty.

     Petitioners resided in Stockbridge, Georgia, at the time the

petition was filed.

                            Background

     Petitioner and Laura F. Jenkins (Mrs. Jenkins) divorced on

September 11, 1998, and are the parents of two minor children.

They lived apart during all of 2002, with Mrs. Jenkins residing

in Henry County and petitioner residing in Clayton County.

Together they provided over one-half of their children’s support

for 2002.

     In 2001, an order establishing joint legal and physical

custody (custody order) set forth a 1 week on/1 week off custody

schedule, starting with an exchange on Sunday at 6 p.m.   The
                               - 3 -

custody order left the details regarding custody on holidays and

school vacations up to petitioner and Mrs. Jenkins to work out on

their own.

     The terms of the custody order provide that as long as Mrs.

Jenkins lives in Henry County, her home will be the children’s

primary residence.   The custody order also provides that if Mrs.

Jenkins were to move into Clayton County from Henry County her

home would still be the children’s primary residence.    If Mrs.

Jenkins were to move somewhere other than Henry County or Clayton

County, the custody order states that petitioner’s home in

Clayton County would become the children’s primary residence.

Mrs. Jenkins lived in Henry County during all of 2002.

     There is no mention of dependency exemption deductions in

either the divorce decree or the custody order.

     Petitioner claimed a dependency exemption deduction for one

of his children on his 2002 Federal income tax return.

Petitioner contends that this was done in accordance with an oral

agreement he had with Mrs. Jenkins.    Mrs. Jenkins claimed

dependency exemption deductions for both children on her 2002

Federal income tax return.

     Respondent issued a notice of deficiency to petitioners for

the year at issue on April 30, 2004.

     Petitioner asserts that he had actual physical custody of

both children for a greater portion of 2002 than Mrs. Jenkins did
                                 - 4 -

and, therefore, he was the custodial parent for 2002.   In this

regard, petitioner presents the testimony of a neighbor, his

mother, and petitioner Laura A. Taylor to support his claim that

he had physical custody of both children for 50 to 70 percent of

the year in issue.   Petitioner asserts that Mrs. Jenkins’s home

was the children’s primary residence in 2002 only for purposes of

keeping the children enrolled in their current school district.

                            Discussion

Dependency Exemption Deduction

     Sections 151 and 152 provide that an individual taxpayer is

entitled to deduct an exemption for a minor child if the taxpayer

provides over half of the support for the child.   Under section

152(e)(1), in the case of a minor child whose parents are

divorced, separated under a written agreement, or who have lived

apart at all times during the last 6 months of the calendar year,

and together provide over half of the support for the minor

child, the parent having custody for a greater portion of the

calendar year (custodial parent) generally shall be treated as

providing over half of the support for the minor child.

Petitioner and Mrs. Jenkins lived apart at all times during 2002,

and together they provided over half of their children’s support.

     Custody under section 152(e)(1) is determined by the terms

of the most recent decree of divorce, separate maintenance,

custody decree, or written separation agreement.   Sec. 1.152-
                               - 5 -

4(b), Income Tax Regs.   If any such instrument is silent as to

custody, has its validity questioned, or awards “split” or joint

custody, then the parent who has custody for the greater portion

of the calendar year will be the custodial parent.    Id.

     A noncustodial parent may be entitled to the dependency

exemption deduction if one of three exceptions in section 152(e)

is satisfied.   The only exception relevant to this case is

section 152(e)(2).   Section 152(e)(2) provides that a child shall

be treated as having received over half of his or her support

from the noncustodial parent if:

           (A) the custodial parent signs a written
     declaration (in such manner and form as the Secretary
     may by regulations prescribe) that such custodial
     parent will not claim such child as a dependent for any
     taxable year beginning in such calendar year, and

           (B) the noncustodial parent attaches such written
     declaration to the noncustodial parent's return for the
     taxable year beginning during such calendar year.

     Section 1.152-4T(a), Q&A-3, Temporary Income Tax Regs., 49

Fed. Reg. 34459 (Aug. 31, 1984),2 further provides:

     The written declaration may be made on a form to be
     provided by the Service for this purpose. * * *




     2
          Temporary regulations are entitled to the same weight
as final regulations. See Peterson Marital Trust v.
Commissioner, 102 T.C. 790, 797 (1994), affd. 78 F.3d 795 (2d
Cir. 1996); Truck & Equip. Corp. v. Commissioner, 98 T.C. 141,
149 (1992); see also LeCroy Research Sys. Corp. v. Commissioner,
751 F.2d 123, 127 (2d Cir. 1984), revg. on other grounds T.C.
Memo. 1984-145.
                                 - 6 -

     Petitioner does not claim that he satisfies the requirements

of section 152(e)(2).   However, he cites several cases where the

Court has looked to where the child resided in determining which

parent had physical custody for purposes of section 152(e)(1).

Otmishi v. Commissioner, T.C. Memo. 1980-472; Dumke v.

Commissioner, T.C. Memo. 1975-91, affd. without published opinion

524 F.2d 1230 (5th Cir. 1975).    In those cases, even if the

custody decree granted legal custody to one parent, under

circumstances not present in this case, the Court held that the

parent was not entitled to a dependency exemption deduction.

     As an initial matter, petitioner has not presented evidence

such as a detailed log or diary showing that he had actual care

and custody of the children for a greater portion of 2002 than

Mrs. Jenkins, and Mrs. Jenkins’s calendar of events seems

contrary to petitioner’s position.       We cannot determine from this

record that the children resided with petitioner for a greater

portion of 2002.

     More importantly, even if petitioner submitted evidence of a

detailed log or diary of the time spent with his children in

2002, we do not agree that petitioner was the custodial parent

for 2002 for purposes of section 152(e).      The terms of the State

custody order clearly state that the primary residence of the

children is with Mrs. Jenkins, provided she resides in Henry

County, and during all of 2002 she did.      Counting days of the
                                   - 7 -

physical whereabouts of children when the terms of the custody

order provides for the primary residence is not necessary.      We

decline the invitation to count days and hours of physical

custody in the context of a functioning cooperative joint custody

arrangement.   Petitioner was not the custodial parent for 2002

under section 152(e)(1).    See Wooten v. Commissioner, T.C. Memo.

2000-54.

Child Tax Credits

     Section 24(a) provides that a taxpayer may claim a credit

for “each qualifying child”.    A qualifying child is defined as an

individual if “the taxpayer is allowed a deduction under section

151 with respect to such individual for the taxable year”.      Sec.

24(c)(1)(A).   Petitioners are not entitled to claim a dependency

exemption deduction under section 151; therefore, they are also

not entitled to the child tax credits.      Respondent’s disallowance

of the child tax credits is sustained.

Earned Income Credit

     Respondent disallowed the earned income credit claimed for

petitioner’s child.

     Subject to limitations, an eligible individual is allowed a

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

earned income.    Sec. 32(a)(1).    An eligible individual is an

individual who has a qualifying child for the taxable year.        Sec.

32(c)(1)(A)(i).    A qualifying child is one who has the same
                               - 8 -

principal place of abode as the taxpayer for more than one-half

of the taxable year, and is a son or daughter of the taxpayer.

Sec. 32(c)(3)(A),(B).

     Petitioner has not shown that his home was the child’s

principal place of abode for more than one-half of 2002.

Petitioner is not an eligible individual with a qualifying child.

Respondent’s disallowance of the earned income credit is

sustained.

Accuracy-Related Penalty

     Section 6662 imposes an accuracy-related penalty “equal to

20 percent of the portion of the underpayment” of tax

attributable to “Any substantial understatement of income tax”.

Sec. 6662(a) and (b)(2).   A substantial understatement of income

tax exists if the amount of the understatement for the taxable

year exceeds the greater of 10 percent of the tax required to be

shown on the return for the taxable year or $5,000.   Sec.

6662(d)(1)(A).   Respondent has met his burden of production with

respect to petitioners’ substantial understatement of income for

the year at issue.   Sec. 7491(c).

     Petitioner contends that he is not liable for the

accuracy-related penalty because he is the custodial parent under

section 152(e) for the year in issue and is entitled to the

dependency exemption deduction.   Generally, a taxpayer may avoid

the imposition of the accuracy-related penalty if “there was a
                                 - 9 -

reasonable cause * * * and that the taxpayer acted in good

faith”.    Sec. 6664(c)(1).   Whether the taxpayer acted with

reasonable cause and in good faith is determined by the relevant

facts and circumstances and the extent to which the taxpayer

attempted to assess the proper tax liability.       Sec.

1.6664-4(b)(1), Income Tax Regs.; see also Neely v. Commissioner,

85 T.C. 934 (1985); Stubblefield v. Commissioner, T.C. Memo.

1996-537.

       We find petitioner’s claim of the dependency exemption

deduction was in good faith but based on a mistaken view of the

law.    Petitioner consistently asserted that he had custody of

both of his children for the greater portion of the calendar

year.    Respondent’s determination of the accuracy-related penalty

under section 6662 is not sustained.

       Reviewed and adopted as the report of the Small Tax Case

Division.

                                         Decision will be entered

                                 for respondent as to the deficiency

                                 and for petitioners as to the

                                 penalty under section 6662.
