                          T.C. Summary Opinion 2017-20



                         UNITED STATES TAX COURT



              BRANDI R. MCCUTCHEON-COX, Petitioner v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent



      Docket No. 13475-15S.                         Filed March 30, 2017.



      Brandi R. McCutcheon-Cox, pro se.

      Gary R. Shuler, Jr., and Louis H. Hill, for respondent.



                              SUMMARY OPINION


      WHERRY, Judge: This case was heard pursuant to section 7463 of the

Internal Revenue Code in effect at the time the petition was filed.1 The decision to


      1
       Unless otherwise indicated, all section references are to the Internal
Revenue Code of 1986, as amended and in effect in the year at issue, and all Rule
references are to the Tax Court Rules of Practice and Procedure. All monetary
                                                                        (continued...)
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be entered is not reviewable by any other court, and this opinion shall not be

treated as precedent for any other case.

      Respondent determined a deficiency of $2,506 in petitioner’s Federal

income tax for the taxable year 2012. The issues for decision are:

      (1) whether petitioner is entitled to dependency exemption deductions for

her three minor children; and

      (2) whether petitioner is entitled to additional child tax credits.

                                      Background

      This case was submitted fully stipulated pursuant to Rule 122. The parties’

stipulation of facts, with accompanying exhibits, is incorporated herein by this

reference. At the time the petition was filed, petitioner resided in Ohio.

      On October 7, 1995, petitioner married Thomas R. Cox. During their

marriage they had three children, P.N.C., B.T.C., and T.R.C.2

      On May 30, 2007, petitioner and Mr. Cox executed a separation agreement

and filed it in divorce proceedings in the Common Pleas Court of Clark County,

Ohio, Domestic Relations Division Adult Section. In the separation agreement,



      1
      (...continued)
amounts are rounded to the nearest dollar.
      2
          The Court uses only the initials of the minor children. See Rule 27(a)(3).
                                        -3-

petitioner and Mr. Cox agreed that Mr. Cox “shall have the tax exemption of the

minor children until such time as * * * [petitioner’s] annual income is $20,000.00

or more. * * * [Petitioner] shall have the exemptions for the year she earns at least

$20,000.00 (not including spousal support) the parties shall alternate thereafter.”

Petitioner signed the separation agreement, which was incorporated into petitioner

and Mr. Cox’s divorce decree. During the taxable year 2012 P.N.C., B.T.C., and

T.R.C. lived with petitioner for more than half the year.

      Petitioner timely filed with respondent a Form 1040, U.S. Individual Income

Tax Return, for the taxable year 2012. On line 22 of her return petitioner reported

total income of $17,732. Petitioner claimed dependency exemption deductions

and additional child tax credits for her three children. Mr. Cox also claimed all

three children as dependents on his 2012 tax return, and respondent to date has

accepted his return as filed. In a notice of deficiency respondent disallowed

petitioner’s dependency exemption deductions and also made computational

adjustments to petitioner’s claimed additional child tax credits.

                                     Discussion

      As a general rule, the Commissioner’s determination in the notice of

deficiency is presumed correct, and the taxpayer bears the burden of proving by a

preponderance of the evidence that the determination is improper. See Rule
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142(a); Welch v. Helvering, 290 U.S. 111, 115 (1933). Deductions are a matter of

legislative grace, and the taxpayer bears the burden of proving that he is entitled to

any claimed deductions. New Colonial Ice Co. v. Helvering, 292 U.S. 435, 440

(1934). The burden of proving a factual issue relating to tax liability shifts to the

Commissioner under certain circumstances. Sec. 7491(a). Because we decide this

case on a preponderance of the evidence, we need not decide which party has the

burden of proof. See sec. 7491(a); Estate of Turner v. Commissioner, 138 T.C.

306, 309 (2012).

I. Dependency Exemption Deductions

      Section 151(a) allows deductions for personal exemptions, including

exemptions for dependents of the taxpayer. See sec. 151(c). Section 152(a)

defines the term “dependent” as a qualifying child or qualifying relative. Section

152(c)(1) defines a qualifying child as an individual who: (i) bears a specified

relationship to the taxpayer described in section 152(c)(2); (ii) has the same

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

(iii) meets certain age requirements; (iv) has not provided over one-half of such

individual’s own support for the calendar year in which the taxable year of the

taxpayer begins; and (v) has not filed a joint return for that taxable year.
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      Respondent agrees that petitioner generally satisfies the requirements of

section 152(c) with respect to P.N.C., B.T.C., and T.R.C. for the taxable year

2012. Nevertheless respondent contends that under the 2007 separation agreement

petitioner is not entitled to the dependency exemption deductions for the three

children. According to respondent, the separation agreement accorded the three

dependency exemptions to Mr. Cox for 2012 because petitioner’s total income for

that year was less than $20,000.

      When parents file separate Federal tax returns and are legally separated or

divorced, section 152(e)(1) provides special rules for determining which parent

may claim a dependency exemption for each child. Generally, section 152(e)

awards the exemption for a child to the custodial parent, that is, the parent having

custody of the child for the greater portion of the year. Section 152(e)(2) provides

an exception to this rule if the following four conditions are met: (i) the child

receives over one-half of his or her support during the taxable year from his or her

parents, (ii) the child was in the custody of one or both of the child’s parents for

over one-half of the taxable year, (iii) the custodial parent “signs a written

declaration” releasing his or her claim to the exemption and, (iv) the noncustodial

parent “attaches such written declaration to the noncustodial parent’s return for the

taxable year”. Sec. 152(e)(1) and (2).
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      The IRS has promulgated Form 8332, Release/Revocation of Release of

Claim to Exemption for Child by Custodial Parent, to implement the written

declaration requirement of section 152. Petitioner was the custodial parent for all

three children during 2012. Nothing in the record indicates that she signed a Form

8332 for the taxable year 2012 or an equivalent written declaration as prescribed

by the regulations, releasing her claim to dependency exemption deductions for

the three children.

      A court order or decree executed before July 3, 2008, can also serve as a

“written declaration” for purposes of section 152(e)(2)(A) if it satisfies the

requirements for the form of a written declaration in effect at the time it is

executed. See Swint v. Commissioner, 142 T.C. 131, 133-136 (2014); sec. 1.152-

4(e)(5), Income Tax Regs. As in effect during 2007, section 152(e)(2)(A) required

that “the custodial parent sign[] 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”. In order for a separation agreement or similar document to comply with

section 152(e)(2)(A), the release of the claim to the dependency exemption

deduction must be unconditional. Swint v. Commissioner, 142 T.C. at 137-139;
                                        -7-

Armstrong v. Commissioner, 139 T.C. 468, 472 (2012), aff’d, 745 F.3d 890 (8th

Cir. 2014).

      Petitioner did not unconditionally waive entitlement to the dependency

exemption deductions in the May 30, 2007, separation agreement. That agreement

explicitly conditioned Mr. Cox’s ability to claim the dependency exemption

deductions on petitioner’s annual income remaining under $20,000. See Gessic v.

Commissioner, T.C. Memo. 2010-88, 99 T.C.M. (CCH) 1362, 1363 (2010). The

fact that the condition set forth in the separation agreement was satisfied during

2012 does not change our analysis. Armstrong v. Commissioner, 139 T.C. at 474;

Gessic v. Commissioner, 99 T.C.M. (CCH) at 1363; see also Brissett v.

Commissioner, T.C. Memo. 2003-310, 86 T.C.M. (CCH) 582, 583 (2003)

(complying with the terms of a separation agreement is not sufficient to allow a

dependency exemption deduction without a valid Form 8332 or equivalent).

Because the requirements of section 152(e)(2) are not met for the taxable year

2012, petitioner remains entitled to claim the dependency exemption deductions

for her children despite the Ohio State court order because Federal law controls.

See sec. 152(a) and (c); Armstrong v. Commissioner, 139 T.C. at 474; Miller v.

Commissioner, 114 T.C. 184, 196 (2000) (“Although the Permanent Orders

granted * * * [the noncustodial parent] the right to claim the dependency
                                         -8-

exemptions for his children, a State court cannot determine issues of Federal tax

law.”), aff’d on other grounds sub nom. Lovejoy v. Commissioner, 293 F.3d 1208

(10th Cir. 2002).

      Our holding is consistent with our holdings in many cases in this Court in

which a taxpayer (like Mr. Cox here) has claimed a dependency exemption

deduction by virtue of satisfying all the required conditions in a divorce decree or

separation agreement, only to learn that the written declaration he attached to his

return did not meet the requirements of section 152(e)(2)(A). See Armstrong v.

Commissioner, 139 T.C. at 472; Porter v. Commissioner, T.C. Memo. 2015-141,

at *7; Allred v. Commissioner, T.C. Memo. 2014-54, at *13; Brissett v.

Commissioner 86 T.C.M. (CCH) at 583. It appears that Mr. Cox was more

fortunate than those other noncustodial spouses. We also acknowledge that our

holding in this case provides a tax benefit to petitioner that she was not entitled to

claim under the separation agreement she signed. However, the question is not

what she is entitled to under State law but what she is entitled to under section

152. See Miller v. Commissioner, 114 T.C. at 196.

II. Child Tax Credits

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

the tax imposed for the taxable year for each qualifying child of the taxpayer who
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has not reached the age of 17 for when the taxpayer is allowed a dependency

exemption under section 151. Sec. 24(c)(1). Because petitioner is entitled to

exemptions for the taxable year 2012 for her three children who were not yet 17 in

2012, she is also entitled to the additional child tax credits she claimed on her

return. Sec. 24(a).

      To reflect the foregoing,


                                                 Decision will be entered for

                                           petitioner.
