                       T.C. Memo. 2009-211



                      UNITED STATES TAX COURT



                  HENRY LEE SCOTT, Petitioner v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket Nos. 6217-07, 22512-07.     Filed September 15, 2009.



     Amanda Glover Evans, for petitioner (at trial).

     Beth A. Nunnink, for respondent.



              MEMORANDUM FINDINGS OF FACT AND OPINION


     COHEN, Judge:   Respondent determined deficiencies in

petitioner’s Federal income tax of $4,050 for 2004 and $4,290 for

2006.   The cases were consolidated for trial, briefing and

opinion.   After concessions, the issue for decision is whether

petitioner’s nephew and niece were his qualifying children for

purposes of the earned income tax credit (EITC) provided by
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section 32.   Except as otherwise stated, all section references

are to the Internal Revenue Code in effect for the years in

issue, and all Rule references are to the Tax Court Rules of

Practice and Procedure.

                          FINDINGS OF FACT

     Some of the facts have been stipulated, and the stipulated

facts are incorporated in our findings by this reference.

Petitioner resided in Tennessee at the time that he filed his

petitions.

     During 2004, 2005, and 2006, petitioner’s sister, Tameka

Henderson (Henderson), and her five children under the age of 19

resided in rented dwellings pursuant to written leases governed

by the regulations of the Tennessee Housing Development Agency,

Low Income Housing Tax Credit Division.      The leases each required

that the premises be occupied only by the identified members of

the household, which were Henderson and her five children.       The

leases covered property on Patton Street in Memphis from August

11, 2004, to July 31, 2005, and August 1, 2005, to July 31, 2006,

and on Walker Avenue in Memphis from September 1, 2006, to August

31, 2007.

     Petitioner began living with Henderson when he was a

teenager, after their mother died.     In 2004, petitioner was

approximately 31 years old.   He lived with his sister and her

children during at least part of 2004 and 2006, even though his
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name was never listed on the leases or in any written consent

executed by the manager of the property.    The father of the

children died in January 2004.    Petitioner contributed toward

support of the children and otherwise was available as an

emergency contact on records of the children’s schools.

     On his Federal income tax returns for 2004 and 2006,

petitioner listed one nephew and one niece as dependents and as

qualifying children for purposes of the EITC.    His return for

2004 used the Patton Street address as his address.    His return

for 2006, as well as a Form W-2, Wage and Tax Statement, attached

to that return, used an address on South Fourth in Memphis as his

address.

     The petitions filed in these cases on March 14 and July 23,

2007, used Walker Street as petitioner’s address.    As of October

2007, petitioner no longer used the Walker Street address, and

mail addressed to petitioner at that address was returned

undelivered to the Court.   As of January 2008, petitioner used an

address on Porter Street in Memphis, which he occupied with his

then girlfriend.   Neither petitioner’s sister nor any of her

children lived at the Porter Street address. (Although this fact

is subsequent to the years in issue, it is relevant to the

credibility issues discussed below.)
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                               OPINION

     Section 32(a)(1) allows an eligible individual an earned

income credit against the individual’s income tax liability.

The credit is increased if the taxpayer has any qualifying

children.   Sec. 32(b).   Respondent has conceded most of the

conditions of petitioner’s eligibility for the EITC.      Those

conditions remaining in dispute are discussed below.

     As applicable for 2004, the pertinent parts of section

32(c)(3) provided that a qualifying child, among other things,

must bear a relationship to the taxpayer as defined in

subparagraph (B) of section 32(c)(3) and must have the same

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

of the taxable year.   As relevant in this case, a descendant of a

brother or sister who the taxpayer cared for as the taxpayer’s

own child satisfied the relationship test.    Sec.

32(c)(3)(B)(i)(II).

     As applicable for 2006, to be eligible to claim an earned

income credit with respect to a child, the taxpayer must

establish that the child meets the definition of “qualifying

child” under section 152(c).    Sec. 32(c)(3)(A).    Section

152(c)(1)(B) sets forth the requirement that a qualifying child

have “the same principal place of abode as the taxpayer for more

than one-half” of the taxable year.
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     Petitioner and Henderson testified at trial.    Petitioner

testified that he stayed with his sister and her children at her

Patton Street address during all of 2004 and at her Walker Street

address during all of 2006.    Petitioner’s sister testified that

petitioner had lived with her and her children “all his life”

from the time he was 17.   She denied that there was ever a time

that her brother did not live with her.    Petitioner and Henderson

both claimed that the leases were supposed to be corrected to

reflect his occupancy of the premises leased by her.

     Henderson testified that the children’s father died in

January 2004 and that petitioner helped whenever the children

needed something, because he was working and she was not.    She

testified that she started working at the end of 2004.

      When asked about the Porter Street address used by

petitioner, Henderson acknowledged that she never lived there.

She identified that address as the place where petitioner’s

girlfriend lived.   When asked about the South Fourth address used

by petitioner, Henderson claimed that she also lived there in

2004 or 2005.

          Though given an opportunity to do so after trial,

petitioner was unable to provide any evidence that his name was

shown on corrected leases.    The evidence in the record

contradicts the claims of petitioner and Henderson that he was
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listed or supposed to be listed as a member of the household

described in the leases.

      Respondent relies on the inconsistencies in the testimony

of petitioner and Henderson and on the terms of the leases to

argue that petitioner has not proven that he and his nephew and

niece had the same principal place of abode for more than one-

half of 2004 and 2006.   For 2004, respondent also argues that

petitioner has not shown that he cared for his niece and nephew

as his own, as required by former section 32(c)(3).

     It has been said that “the distillation of truth from

falsehood * * * is the daily grist of judicial life”.      Diaz v.

Commissioner, 58 T.C. 560, 564 (1972).     We are troubled by the

inconsistencies between the objective evidence in the record and

the testimony of the witnesses.   Nonetheless, it is not

improbable that petitioner lived with Henderson and her children

contrary to the terms of the leases.   It is likely that after the

death of the children’s father in January 2004, petitioner

assumed a paternal role toward his nephews and his niece as well

as making payments toward their support.    For 2004, therefore, we

conclude that petitioner and the children had the same place of

abode for most of the year, that he cared for them as his own,

and that they are qualifying children for purposes of the EITC.

     For 2006, however, there is other evidence suggesting that

petitioner maintained an address separate from Henderson’s.
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Because neither petitioner nor Henderson adequately explained

when he or they lived at the South Fourth address, we cannot

conclude that petitioner and the children shared the same abode

for more than half of that year.    Petitioner’s nephew and niece

are not qualifying children for 2006.

     Respondent has acknowledged that petitioner is eligible for

the EITC even without a qualifying child for 2006 and that a

computation under Rule 155 is necessary in any event.    To reflect

the foregoing,


                                        Decisions will be entered

                                   under Rule 155.
