                  T.C. Summary Opinion 2001-19



                     UNITED STATES TAX COURT



                   LEONA PAYTON, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 9035-99S.           Filed February 27, 2001.


     Leona Payton, pro se.

     James A. Kutten, for respondent.


     GOLDBERG, 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, and all Rule references are to the

Tax Court Rules of Practice and Procedure.
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     Respondent determined deficiencies in petitioner’s Federal

income taxes and accuracy-related penalties in the following

amounts for the following taxable years:
                                   Penalty
     Year      Deficiency          Sec. 6662(a)
     1995        $1,830              $357.00
     1996         2,051               410.20
     1997         1,875               375.00

     After concessions by petitioner,1 the issues for decision

are: (1) Whether petitioner is entitled to dependency exemption

deductions for several individuals for the years 1995, 1996, and

1997; (2) whether petitioner is entitled to head of household

status; (3) whether petitioner is entitled to an earned income

credit for 1996; and (4) whether petitioner is liable for

accuracy-related penalties for 1995, 1996, and 1997.

     Some of the facts in this case have been stipulated and are

so found.   The stipulation of facts and the exhibits received

into evidence at trial are incorporated herein by this reference.

At the time the petition was filed, petitioner lived in St.

Louis, Missouri.

     Petitioner lived in a 2-bedroom apartment with a roommate

from 1995 through 1997.   During these years, petitioner assisted,


     1
          Petitioner concedes that she received $309 wage income
from Incarnate Word Hospital and $42 interest income during 1995
which she failed to report on her 1995 Federal income tax return.
Petitioner further concedes that she did not provide more than
half of the total support for her mother, Mattie Barnes, during
1995, and stepfather, John Jones, during 1995 and 1996.
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as needed, a number of individuals, mostly family members, with

food, clothing, shelter, and on some occasions, with financial

aid.       Petitioner is a licensed practical nurse and worked full-

time at South Point Hospital during the years in issue.

       After the death of petitioner’s mother, Mattie Barnes (Ms.

Barnes), in January 1996,       Areail Pruitt2 (Areail), petitioner’s

youngest sister, had difficulties coping with the loss of their

mother.       Areail’s children, petitioner’s niece and nephew,

Racquelle Givens (Racquelle) and Rafael Givens (Rafael),

respectively, stayed with petitioner from the time of Ms. Barnes’

death until after completion of the school year in June 1996.

Both Racquelle and Rafael were minors during the years in issue.

       Petitioner’s older brother, Preather Pruitt (Preather), age

41 in 1995, had undergone 2 heart surgeries prior to 1995 and was

disabled during the years in issue.        He lived in his own

apartment but could not work due to his disability.        He received

approximately $400 per month as disability payment from his

former employer.       Preather’s monthly rent was approximately $300

per month which did not include utility expenses.        Petitioner

frequently assisted Preather financially.        In 1996, Preather

received Medicaid benefits in addition to the $400 monthly


       2
          The family name “Pruitt” is spelled “Preuitt” on
petitioner’s 1997 Federal income tax return. For consistency, we
shall use the “Pruitt” spelling for purposes of this opinion.
                                - 4 -


disability payments.   However, it is unclear from the record

whether Preather continued to receive Medicaid benefits in 1997.

     Preather’s son, Jamal Pruitt (Jamal), age 15 in 1997, lived

with petitioner during 1997.   Petitioner claimed Jamal as a

“fosterchild” on her 1997 Federal income tax return.

     Petitioner’s younger brother, Johnnie Payton (Johnnie), age

31 in 1995, lived with petitioner or his mother, Ms. Barnes,

until her death in 1996.    Johnnie did not have his own residence

until 1997, when, with the financial help of petitioner, he moved

into a cousin’s basement.   Johnnie was not gainfully employed

during the years in issue and had no other sources of income.

     Reginald Givens (Reginald), age 36 in 1997, is the brother

of petitioner’s brother-in-law, and the father of Racquelle and

Rafael.   He is not related to petitioner by blood or marriage.

Reginald lived with petitioner for about 8 months in 1997 and was

not gainfully employed.

     Petitioner reported wage income of $24,685, $26,563, and

$25,653 in 1995, 1996, and 1997, respectively.   On her 1995

Federal income tax return, petitioner claimed dependency

exemption deductions for Mattie Barnes, John Jones, Preather

Pruitt, and Johnnie Payton.    On petitioner’s 1996 Federal income

tax return, petitioner claimed dependency exemption deductions

for Racquelle Givens, Rafael Givens, Johnnie Payton, and John

Jones.    On her 1997 Federal income tax return, petitioner claimed
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dependency exemption deductions for Reginald Givens, Jamal

Pruitt, Johnnie Payton, and Preather Pruitt.   Petitioner also

filed as head of household on her 1995, 1996, and 1997 Federal

income tax returns and claimed an earned income credit on her

1996 Federal income tax return.

     Respondent disallowed the dependency exemption deductions

because petitioner failed to establish that she was entitled to

the exemption for each individual claimed.   As a result of the

disallowance, respondent further determined that petitioner’s

filing status was single, not head of household, disallowed the

earned income credit, and imposed accuracy-related penalties.

Dependency Exemption

     Section 151(c) allows a taxpayer to deduct an annual

exemption amount for each dependent of the taxpayer.   A

“dependent” is defined in section 152(a) as an individual “over

half of whose support, for the calendar year in which the taxable

year of the taxpayer begins, was received from the taxpayer (or

is treated under subsection (c) or (e) as received from the

taxpayer)”.

     In order to prevail, petitioner must show by competent

evidence that the following requirements are satisfied: (1) The

dependent’s gross income must be less than the amount of the

exemption amount for the taxable year in which the deduction is

claimed (the gross income requirement); (2) the dependent must
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satisfy the definition of a “dependent” within the meaning of

section 152(a) (the relationship or member of household

requirement); and (3) petitioner must furnish more than half of

the dependent’s total support (the support requirement).   See

secs. 151(c)(1)(A); 152(a).   All requirements must be satisfied

for each individual claimed by petitioner.

     Each claimed individual satisfies the definitional

requirement of “dependent” within the meaning of section 152(a)

under the relationship test (as nieces, nephews, or brothers) or

the principal place of abode requirement (i.e., Reginald for

1997).   Therefore, the next issue is whether petitioner furnished

more than one-half of each dependent’s total support.

     The term “support” includes food, shelter, clothing, medical

and dental care, education, etc.   Sec. 1.152-1(a)(2)(i), Income

Tax Regs.   The amount of total support may be reasonably inferred

from competent evidence.   See Stafford v. Commissioner, 46 T.C.

515, 518 (1966).   However, where the amount of total support of a

dependent during the taxable year is not shown and cannot be

reasonably inferred from competent evidence, then it is not

possible to conclude that the taxpayer has contributed more than

one-half.   See Blanco v. Commissioner, 56 T.C. 512, 515 (1971);

Fitzner v. Commissioner, 31 T.C. 1252, 1255 (1959).

     Although we find petitioner’s testimony credible that she

contributed to each claimed individual’s support, the record
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based solely on her testimony is incomplete.   She has not kept

records of how much she spent on the claimed individuals.

Unfortunately, petitioner was unable to reconstruct the dollar

amount of the total support for Racquelle, Rafael, Jamal,

Reginald, and Preather.   The claimed dependents did not testify

at trial and there is little information in the record as to

contributions, if any, they have made towards their own support

or gross income.   In the cases of the minor dependents,

Racquelle, Rafael, and Jamal, petitioner testified that other

sources of income were available but failed to establish the

amounts.3   Also, as to Preather, the record reflects that he

received disability and Medicaid payments, but petitioner failed

to establish the amount of her contributions during the years in

issue.

     Petitioner has made a valiant effort to help support, in any

way she was able, close individuals and family members who have

gone through difficult times.   She was able to give sustenance to

these individuals, and herself, by working diligently as a

practical nurse, and, at times, taking cash advances on her

credit card or loans.   Petitioner worked towards reducing her



     3
          Racquelle and Rafael’s mother, Areail, was employed
during 1996 as a claims adjuster for General American. Also, the
record is incomplete as to the income of Jamal’s mother, Patricia
Butler, and her contributions, if any, towards the total support
of her son.
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debt by “paying them back, yearly, yearly, yearly***”   Although

we sympathize with petitioner and acknowledge that she clearly

provided some support to each individual claimed, we cannot find,

on the basis of the record, that petitioner provided over half of

the total support for most of the claimed dependents as required

by section 152.   Because petitioner failed to establish the total

amount of support from all sources, we are unable to conclude

that petitioner provided more than one-half of the total support

for Racquelle, Rafael, Jamal, Reginald, and Preather.   Therefore,

we hold that petitioner is not entitled to section 151 dependency

exemption deductions for the taxable years 1995, 1996, and 1997

as to Racquelle, Rafael, Jamal, Reginald, and Preather.

     However, as to Johnnie, we believe petitioner’s testimony

regarding Johnnie’s inability to contribute to his own support

during a time when he was trying to “beat a habit”.   We find that

petitioner did contribute more than half of his support, and,

therefore, petitioner is entitled to claim section 151 dependency

exemption deductions for Johnnie in 1995, 1996, and 1997.

Head of Household Status

     According to the relevant part of section 2(b), an

individual shall be considered a head of household if such

individual (1) is not married at the close of the taxable year

and (2) maintains as her home a household which constitutes for

more than one-half of the taxable year the principal place of
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abode of a person who is a dependent of the taxpayer, if the

taxpayer is entitled to a deduction for the taxable year for such

person under section 151.

     In this case, petitioner was not married at the close of

1995, 1996, or 1997.   Petitioner is not entitled to dependency

exemption deductions for the years in issue as to Racquelle,

Rafael, Jamal, Reginald, and Preather as stated above.   However,

she is entitled to dependency exemption deductions as to Johnnie

for 1995, 1996, and 1997.   Johnnie lived with petitioner, and, at

times, with their mother during 1995.   She further testified that

her home was “a place he knew he had*** to lay his head***” until

1997 when Johnnie moved into a relative’s basement.   Johnnie

lived with petitioner more than one-half of the year during 1995

and 1996 to satisfy the requirement of section 2(b), but he did

not live with petitioner more than one-half of the year during

1997.   Therefore, on the basis of the record, we hold that

petitioner is entitled to file her 1995 and 1996 Federal income

tax returns as head of household.

Earned Income Credit

     Respondent made a computational adjustment disallowing

petitioner’s claimed earned income credit.

     The relevant parts of section 32 provide that an individual

is eligible for the earned income credit if: (1) The individual’s

principal place of abode is in the United States for more than
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one-half of the taxable year; (2) the individual is between the

ages of 25 and 65 before the close of the taxable year; and (3)

the individual is not an allowable dependent claimed by another

taxpayer in the same calendar year.     Petitioner has met all of

the above requirements.    However, petitioner is subject to the

limitations of the earned income credit under section 32(a)(2).

Because petitioner’s income was greater than $9,230 in 1995,

$9,500 in 1996, and $9,770 in 1997, petitioner is not allowed to

claim the credits.   See sec. 32(a)(2).

Accuracy-Related Penalty

     The last issue for decision is whether petitioner is liable

for accuracy-related penalties pursuant to section 6662(a).

Section 6662(a) imposes a penalty of 20 percent of the portion of

the underpayment that is attributable to negligence or disregard

of rules or regulations.    See sec. 6662(b)(1).   Negligence is the

“‘lack of due care or failure to do what a reasonable and

ordinarily prudent person would do under the circumstances.’"

Neely v. Commissioner, 85 T.C. 934, 947 (1985)(quoting Marcello

v. Commissioner, 380 F.2d 499, 506 (5th Cir. 1967), affg. 43 T.C.

168 (1964) and T.C. Memo. 1964-299).     Negligence also includes

any failure by the taxpayer to keep adequate books and records or

to substantiate items properly.    See sec. 1.6662-3(b)(1), Income

Tax Regs.   The term “disregard” includes any careless, reckless,

or intentional disregard.    Sec. 6662(c).   No penalty shall be
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imposed if it is shown that there was reasonable cause for the

underpayment and the taxpayer acted in good faith with respect to

the underpayment.   See sec. 6664(c).   The determination of

whether a taxpayer acted with reasonable cause and good faith

within the meaning of section 6662(c) is made on a case-by-case

basis, taking into account all the pertinent facts and

circumstances.   See sec. 1.6664-4(b)(1), Income Tax Regs.

     At trial, petitioner established that she acted in good

faith with respect to the 1995, 1996, and 1997 claimed dependency

exemption deductions.   We find petitioner’s testimony to be

credible as to her support of certain individuals during

difficult periods in their lives.   Petitioner’s lack of

compliance was not based upon bad faith, but rather on a

misunderstanding of the requirements of the dependency exemption

deduction.   We also find petitioner credible in her intentions to

comply with complex Federal income tax requirements by seeking

out assistance from the Internal Revenue Service.     On the basis

of the record, we hold that petitioner is not liable for

accuracy-related penalties under section 6662(a) for the years in

issue.

     Reviewed and adopted as the report of the Small Tax Case

Division.

                                          Decision will be entered

                                    under Rule 155.
