                               T.C. Memo. 2013-117



                           UNITED STATES TAX COURT



                   BASIL OLIVER, JR., Petitioner v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent



      Docket No. 10964-10.                       Filed April 30, 2013.



      Basil Oliver, Jr., pro se.

      Karen O. Myrick, for respondent.



            MEMORANDUM FINDINGS OF FACT AND OPINION


      PARIS, Judge: On February 8, 2010, respondent issued to petitioner a

notice of deficiency which determined a Federal income tax deficiency of $3,137

for the 2008 tax year. Petitioner filed a petition with the Court on May 12, 2010,

seeking redetermination.
                                          -2-

[*2] After concessions by the parties,1 the issues left for determination are: (1)

whether petitioner is entitled to a dependency exemption deduction for his nephew

for the 2008 tax year; (2) whether petitioner is entitled to a child tax credit for his

nephew for the 2008 tax year; and (3) whether petitioner is entitled to an

additional earned income credit on account of his nephew for the 2008 tax year.

                                FINDINGS OF FACT

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

facts and the attached exhibits are incorporated herein by this reference. Petitioner

resided in Missouri when the petition was filed.

      Petitioner claimed a dependency exemption deduction, the child tax credit,

and an additional earned income credit on his Federal tax return for his infant

nephew TAH2 for the 2008 tax year. TAH is the twin son of petitioner’s half

brother, Trenton Freeman. Petitioner and Mr. Freeman have the same mother but

not the same father. Accordingly, petitioner’s father, Basil Oliver, Sr. (Basil Sr.),

is not the biological grandfather of TAH.


      1
        Respondent has conceded that petitioner is eligible for an earned income
credit of $253, which was omitted from the notice of deficiency.
      2
       It is the Court’s policy to refer to a minor by his or her initials. See Rule
27(a)(3). Unless otherwise indicated, all Rule references are to the Tax Court
Rules of Practice and Procedure, and all section references are to the Internal
Revenue Code in effect for the year in issue.
                                        -3-

[*3] During the 2008 tax year petitioner lived in the same house as Basil Sr. in

St. Louis, Missouri. Petitioner and Basil Sr. did not have a formal lease

agreement. Instead, petitioner paid Basil Sr. between $250 and $300 per month

for living expenses. These payments were for petitioner’s rent, utilities, food, and

other living expenses. During the 2008 tax year petitioner’s total income was

$9,559. For the same year Basil Sr. reported wages of $12,045.

      In April or May 2008 petitioner began assisting his brother in caring for

TAH. At the time, Mr. Freeman had five young children under the age of six, and

petitioner took in TAH to relieve some of the economic burden on his brother.

Petitioner continued this care for about a year--ending around March or April

2009. During this period of care several people contributed to the financial

support of TAH. Petitioner spent around $150 per month for TAH’s support. This

money went toward food, diapers, clothing, and shoes. For child care, petitioner

and Basil Sr. would trade off watching TAH: one would watch TAH while the

other worked, then they would switch. TAH slept in his own crib in petitioner’s

bedroom.

      TAH’s mother, Diedre Hampton, provided for TAH as well as his twin

brother and older half sibling. Ms. Hampton remained TAH’s legal guardian

during the relevant period and was responsible for TAH’s healthcare through her
                                        -4-

[*4] Medicaid qualifications. It is, however, unclear the total amount of money, if

any, she provided in support of TAH.

      Petitioner claimed a dependency exemption deduction for TAH on his 2008

Federal tax return. Petitioner also claimed a child tax credit and an additional

earned income credit on account of TAH for the 2008 tax year. Neither Mr.

Freeman, Ms. Hampton, nor Basil Sr. claimed a dependency exemption deduction

or any other credits on TAH’s account for the 2008 tax year.

                                     OPINION

      In general, the Commissioner’s determination set forth in a notice of

deficiency is presumed correct, and the taxpayer bears the burden of showing the

determination is in error. Rule 142(a); Welch v. Helvering, 290 U.S. 111, 115,

(1933). Deductions and credits are a matter of legislative grace, and the taxpayer

bears the burden of proving entitlement to any deduction or credit claimed on a

return. INDOPCO, Inc. v. Commissioner, 503 U.S. 79, 84 (1992); New Colonial

Ice Co. v. Helvering, 292 U.S. 435, 440 (1934).

      Under certain circumstances the burden of proof as to factual matters shifts

to the Commissioner pursuant to section 7491(a). Although neither party

alleges the applicability of section 7491(a), the burden of proof has not shifted to

respondent with respect to any of the issues in this case because petitioner has not
                                         -5-

[*5] satisfied the requirements of section 7491(a)(2) to substantiate the items in

dispute. Accordingly, petitioner bears the burden of showing that he is entitled to

a dependency exemption deduction for TAH, that he is entitled to an earned

income credit attributable to TAH, and that he is entitled to a child tax credit for

TAH for the 2008 tax year.

I. Dependency Exemption Deduction

      Section 151(a) and (c) allows taxpayers an annual exemption deduction for

each “dependent” as defined in section 152. A dependent is either a qualifying

child under section 152(a)(1) or a qualifying relative under section 152(a)(2). The

requirement is disjunctive, and, accordingly, satisfaction of either the qualifying

child requirement or the qualifying relative requirement allows the individual to be

claimed as a dependent.

      A. Qualifying Relative

      Section 152(d) lays out the requirements for a dependent to be a qualifying

relative. A qualifying relative is an individual: (1) who bears a relationship to the

taxpayer as described in section 152(d)(2); (2) whose gross income for the year is

less than the exemption amount defined in section 151(d); (3) who receives over

half of his or her support from the taxpayer for the taxable year at issue; and (4)
                                         -6-

[*6] who is not a qualifying child of the taxpayer or of any other taxpayer for the

taxable year. Sec. 152(d)(1).

      Petitioner meets the first two requirements of section 152(d)(1). TAH and

petitioner satisfy the relationship test in 152(d)(1)(A) and (2) for TAH to be a

qualifying relative because TAH is the son of petitioner’s brother.3 See sec.

152(d)(2)(E), (f)(4). Under the second requirement, the relative’s income cannot

exceed the exemption amount as defined in section 151(d). Sec. 152(d)(1)(B).

TAH was an infant child who did not receive any income for the 2008 tax year.

Accordingly, TAH satisfies these two requirements.

      The third requirement for an individual to be a qualifying relative under

section 152(d)(1)(C) is that the taxpayer provide over one-half of the individual’s

support for the tax year. To meet the burden of support, a taxpayer must establish,

by competent evidence, the total amount of support furnished for the taxable year

at issue. See Blanco v. Commissioner, 56 T.C. 512, 514-515 (1971); Cotton v.

Commissioner, T.C. Memo. 2000-333. Further, to determine whether a taxpayer

provided over half of the total support to a qualifying relative, the taxpayer’s

contribution will be compared to the entire amount of support which the individual


      3
       Respondent concedes that petitioner, as the child’s uncle, meets the familial
requirements to claim TAH as a qualifying relative.
                                         -7-

[*7] received from all sources, including support which the individual herself

supplied. Sec. 1.152-1(a)(2)(i), Income Tax Regs. Support includes “food,

shelter, clothing, medical and dental care, education, and the like.” Id.

      Petitioner offered very little evidence for either the total sources of support

for TAH or petitioner’s own share of TAH’s support. Petitioner did not have a

bank account during the 2008 tax year and could not show his amount of support

to TAH through canceled checks or receipts. Petitioner and Basil Sr. traded off

watching TAH and did not use a babysitter or other child care. Both petitioner and

Ms. Hampton helped pay for food and other necessities for TAH. Ms. Hampton

remained TAH’s legal guardian and provided healthcare for him through her

medicaid qualification. While there is some evidence petitioner helped support

TAH, this Court cannot conclude on the record the amount of the total support for

TAH, nor the amount of support petitioner provided. Therefore, TAH is not

petitioner’s qualifying relative, and petitioner is not entitled to a dependency

exemption deduction under section 152(d) for the 2008 tax year. See sec. 151.

      B. Qualifying Child

      Section 152(c) provides the requirements for a relative to be a qualifying

child of a taxpayer. Sec. 152(c)(1)(A)-(E). Section 152(c) requires that the

individual: (1) bear a specified relationship to the taxpayer; (2) share the same
                                        -8-

[*8] abode as the taxpayer; (3) meet specific age requirements; and (4) not have

provided over one-half of his or her own support. Respondent concedes all but

one of the requirements: respondent maintains TAH did not have the same abode

as petitioner for more than one-half of the tax year as required by section

152(c)(1)(B). Respondent argues petitioner admitted that TAH lived with him

only on an “as needed” basis. The Court finds this argument unconvincing

because the statement was made over the phone to an informal, unknown

representative of respondent. Petitioner has on multiple occasions stated that TAH

lived with him for more than one-half of the 2008 tax year. Accordingly, TAH is

petitioner’s qualifying child under section 152(c) for the 2008 tax year.

      Respondent also argues that petitioner is not the correct taxpayer to use a

dependency exemption deduction for TAH for the 2008 tax year. Section

152(c)(4) provides tie-breaker rules for taxpayers who can claim the same

individual as a qualifying child. The tie-breaker rules in section 154(c)(4) do not,

however, apply to taxpayers claiming the same individual as a qualifying relative.4




      4
        Respondent incorrectly uses factors from the qualifying relative test to
disqualify petitioner from claiming the exemption deduction. It is immaterial for
the tie-breaker rules of sec. 152(c)(4) who may claim TAH as a qualifying relative
because the rules apply only to qualifying children.
                                        -9-

[*9] As noted above, only taxpayers who share the same abode with the

individual can claim the individual as a qualifying child. Sec. 152(c)(1)(B). The

only taxpayers who satisfy this requirement are petitioner and his father.

Specifically, neither of TAH’s parents can claim TAH as a qualifying child

because neither had the same principal place of abode as TAH for more than one-

half of the taxable year. Further, Basil Sr. cannot claim TAH as a qualifying child

because TAH does not bear the requisite relationship to Basil Sr. See sec.

152(c)(2). TAH is not his child or stepchild5--or descendent thereof--under

section 152(f)(1)(A). Accordingly, petitioner is the only individual who can claim

TAH as a qualifying child, and the section 152(c)(4) tie-breaker rules are

inapplicable.




      5
        “Child” is defined in sec. 152(f) to include a stepson or stepdaughter of the
taxpayer--but neither “stepson” nor “stepdaughter” is defined. In Collier v.
Commissioner, T.C. Memo. 2011-126, this Court interpreted “stepdaughter” by
using its ordinary and common meaning. “Stepson” should be interpreted
accordingly. Webster’s New Universal Unabridged Dictionary 1867 (2003)
defines “stepson” to mean “a son of one’s husband or wife by a previous
marriage.” Basil Sr. filed his 2008 tax return as “single” and therefore did not
have any stepchildren for the 2008 tax year. Accordingly, TAH is not Basil Sr.’s
child or a descendant thereof for the purposes of sec. 152(d)(2) because TAH’s
father, Mr. Freeman, is not Basil Sr.’s stepchild. See sec. 152(f)(1)(A)(i).
                                        - 10 -

[*10] Petitioner has met his burden of establishing that he is entitled to a

dependency exemption deduction under sections 151 and 152(a)(1) for his nephew

TAH for the 2008 tax year.

II. Child Tax Credit

      Section 24(a) allows a tax credit of a specified amount with respect to each

qualifying child of a taxpayer.6 As pertinent here, section 24(c)(1) provides that,

for purposes of section 24, “qualifying child” means an individual under age 17

who is a qualifying child of the taxpayer as defined in section 152(c). As

discussed above, petitioner has shown TAH is his qualifying child under section

152(c).7 Therefore, petitioner has established that TAH is a qualifying child for

the purposes of section 24. Accordingly, petitioner has met his burden of

establishing he is entitled to a child tax credit for TAH for the 2008 tax year under

section 24.




      6
       The amount of the credit is limited by adjusted gross income and amount of
tax paid. See sec. 24(b).
      7
       TAH was born in 2007, meaning that at most, he was one year old in the
2008 tax year.
                                        - 11 -

[*11] III. Earned Income Credit

      Section 32(a)(1) permits an eligible individual an earned income credit

against the individual’s tax liability.8 As pertinent here, the term “eligible

individual” is defined to mean “any individual who has a qualifying child for the

taxable year”. Sec. 32(c)(1)(A)(i). A qualifying child is a child of the taxpayer as

defined in section 152(c). Sec. 32(c)(3)(A). As discussed above, petitioner has

established that TAH is his qualifying child under section 152(c). Further,

petitioner is the only individual who can claim TAH as a qualifying child under

section 152(c) because for 2008 no one else met the residency or relationship

requirements of section 152. See sec. 152(c)(1)(A) and (B). Therefore, petitioner

has established that TAH is his qualifying child for the purposes of section

32(c)(3) for tax year 2008. Accordingly, petitioner has met his burden of

establishing he is entitled to an additional earned income credit for TAH for the

2008 tax year.9




      8
       The amount of the credit is determined according to percentages that vary
depending on the number of qualifying children. Sec. 32(b). The credit is also
subject to a limitation based on adjusted gross income. Sec. 32(a)(2).
      9
        Respondent concedes petitioner alone is eligible for an earned income
credit of $253.
                                  - 12 -

[*12] To reflect the foregoing,


                                                 Decision will be entered

                                           for petitioner.
