                          T.C. Summary Opinion 2014-46



                         UNITED STATES TAX COURT



                  JASON ALAN BRUCE, Petitioner v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent



      Docket No. 21253-12S.                         Filed May 12, 2014.



      Jason Alan Bruce, pro se.

      Michael Hensley and Brian Beddingfield (student), for respondent.



                              SUMMARY OPINION


      PANUTHOS, Chief Special Trial Judge: This case was heard pursuant to

the provisions of section 7463 of the Internal Revenue Code in effect when the

petition was filed. Pursuant to section 7463(b), the decision to be entered is not

reviewable by any other court, and this opinion shall not be treated as precedent
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for any other case. Unless otherwise indicated, subsequent section references are

to the Internal Revenue Code (Code) in effect for the year in issue, and all Rule

references are to the Tax Court Rules of Practice and Procedure.

      Respondent determined a $6,804 deficiency in, and an accuracy-related

penalty of $1,360.80 with respect to, petitioner’s 2010 Federal income tax. The

issues for decision are: (1) whether petitioner is entitled to the filing status of

married filing jointly, and if not, whether he is entitled to (a) dependency

exemption deductions, (b) the child tax credit, (c) the additional child tax credit,

and (d) the earned income credit (EIC), and (2) whether petitioner is liable for the

accuracy-related penalty under section 6662(a).

                                     Background

      Some of the facts have been stipulated, and we incorporate the stipulation of

facts and the attached exhibits herein by reference. Petitioner resided in California

when the petition was filed.

      Petitioner and his former wife Jazsmine Bruce were married in 2008, and

they had a son who was born in 2008. Ms. Bruce also had a daughter from a

previous relationship. Petitioner has worked as a technician on an aircraft carrier

in the U.S. Navy since 1997, and he was deployed on sea duty intermittently

throughout 2010. Petitioner’s family lived in Navy housing in 2009. Petitioner,
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Ms. Bruce, and the children moved into petitioner’s mother-in-law’s house in

January 2010. During 2010 petitioner, Ms. Bruce, and the children mostly lived at

petitioner’s mother-in-law’s house but also spent time at petitioner’s mother’s

house.

      In March 2010 petitioner initiated divorce proceedings. The record is

unclear as to any detail of the specific events between the time of the divorce

proceedings in March 2010 and February 2011, when the final divorce decree was

entered. Petitioner continued to live with Ms. Bruce and the children at least until

December 2010, when he moved out of his mother-in-law’s house while Ms.

Bruce remained there with the children.

      Petitioner and Ms. Bruce filed a 2009 joint Federal income tax return after

their first year of marriage, claiming dependency exemption deductions for the two

children and the child tax credit, the additional child tax credit, and the EIC.

      In January 2011 petitioner electronically filed a 2010 return, claiming the

status of married filing jointly. The return reflected an overpayment of $4,581. In

February 2011 petitioner and Ms. Bruce discussed the status of the tax return via

email. Ms. Bruce learned that petitioner had filed a joint tax return for 2010 and

that he intended to share the refund. Ms. Bruce did not object to the joint filing

but indicated that she would consult her mother’s friend who “does taxes” to claim
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deductions for certain school expenses. Ms. Bruce also provided her bank

information to petitioner via email after he mentioned sharing the refund.

      In March 2011 Ms. Bruce filed a 2010 Federal income tax return, claiming

head of household filing status. Ms. Bruce also claimed the two minor children as

dependents. Petitioner was unaware of Ms. Bruce’s separately filed return until

the Internal Revenue Service (IRS) notified him that it had disallowed the claimed

joint return filing status. The record reflects that petitioner had a higher adjusted

gross income than Ms. Bruce in 2010.1

      In a notice of deficiency dated July 11, 2012, respondent determined that

petitioner was not entitled to the filing status of married filing jointly and adjusted

his filing status to married filing separately. Respondent also disallowed the

claimed dependency exemption deductions, the child tax credit, the additional

child tax credit, and the EIC and imposed the accuracy-related penalty under

section 6662(a).




      1
      Petitioner reported adjusted gross income (AGI) of $36,943 for 2010, and
Ms. Bruce reported AGI of $15,020 for 2010.
                                         -5-

                                     Discussion

I.     Burden of Proof

       In general, the Commissioner’s determination as to a taxpayer’s tax liability

is presumed correct, and the taxpayer bears the burden of proving otherwise. See

Rule 142(a); Welch v. Helvering, 290 U.S. 111, 115 (1933). In certain

circumstances, the burden of proof shifts to the Commissioner if the taxpayer

introduces credible evidence with respect to any factual issues relevant to

ascertaining the taxpayer’s tax liability. Sec. 7491(a)(1). Because petitioner has

not alleged or shown that section 7491(a) applies, the burden of proof remains on

him.

II.    Joint or Separate Return

       Section 6013(a) permits a husband and wife to file a joint return. Spouses

who elect to file a joint return for a tax year are required to compute their tax on

the aggregate income of both spouses, and both spouses are jointly and severally

liable for all taxes due. See sec. 6013(d)(3); Butler v. Commissioner, 114 T.C.

276, 282 (2000).

       The married filing jointly status does not apply to a Federal income tax

return unless both spouses intend to make a joint return. Jones v. Commissioner,

327 F.2d 98, 101 (4th Cir. 1964), rev’g on other grounds 39 T.C. 734 (1963). The
                                          -6-

failure of one spouse to sign the return does not negate the intent of filing a joint

return by the nonsigning spouse. Estate of Campbell v. Commissioner, 56 T.C. 1,

12 (1971).

        Where spouses file a joint return with respect to a tax year, neither spouse

may thereafter elect married filing separately status for that tax year if the time for

filing the tax return of either spouse has expired. See United States v. Guy, 978

F.2d 934 (6th Cir. 1992); Ladden v. Commissioner, 38 T.C. 530, 534 (1962);

Haigh v. Commissioner, T.C. Memo. 2009-140; sec. 1.6013-1(a)(1), Income Tax

Regs.

        Even if Ms. Bruce had tacitly agreed to the filing of the 2010 joint return, it

is undisputed that Ms. Bruce subsequently filed a separate tax return before the

time for either spouse to file a return had expired. See sec. 1.6013-1(a)(1), Income

Tax Regs. Generally, the time for filing a tax return is the 15th day of April

following the close of the calendar year. Sec. 6072(a). Ms. Bruce timely filed a

separate return in March 2011. Thus, we sustain respondent’s adjustment of

petitioner’s filing status to married filing separately.

III.    Dependency Exemption Deductions

        Section 151(c) allows as a deduction an exemption for each dependent of a

taxpayer in computing taxable income. Section 152(a) provides that a dependent
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means a “qualifying child” or a “qualifying relative”. Section 152(c) provides the

requirements for an individual to be a “qualifying child” of a taxpayer.

Sec. 152(c)(1)(A)-(E). Section 152(c)(1) defines a “qualifying child” as an

individual: (1) who bears a designated relationship to the taxpayer; (2) who shares

the same principal place of abode as the taxpayer; (3) who meets specific age

requirements; (4) who has not provided over one-half of his or her own support;

and (5) who has not filed a joint return with the individual’s spouse.

      Generally, the residency test is satisfied if the individual has the same

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

for which the dependency exemption deduction is claimed. Sec. 152(c)(1)(B).

Temporary absences due to special circumstances, including absences due to

illness, education, business, vacation, and military service, are not treated as

absences for purposes of determining whether the residency test is satisfied. Sec.

1.152-1(b), Income Tax Regs.; see also Rowe v. Commissioner, 128 T.C. 13

(2007); Hein v. Commissioner, 28 T.C. 826 (1957).

      A child sometimes meets the qualifying child test for more than one

taxpayer.2 Under section 152(c)(4)(A), if an individual may be claimed as a

      2
      In general, sec. 152 is designed to ensure that a given dependent can be
claimed on only one tax return. Sec. 152(c)(4), the so-called tie-breaker rule,
                                                                       (continued...)
                                        -8-

qualifying child by two or more taxpayers for a taxable year, the individual is

treated as the qualifying child of (1) the taxpayer who is the individual’s parent or

(2) in the case of no such parent, the individual with the highest adjusted gross

income (AGI).

      Under section 152(c)(4)(B), as relevant here, if an individual may be

claimed as a qualifying child by one or both parents and they do not file a joint

return, the child is treated as the qualifying child of the parent with whom the

child resided for the longer period during the taxable year. Sec. 152(c)(4)(B)(i).

If the child resided with both parents for the same amount of time, the child is

treated as the qualifying child of the parent with the higher AGI. Sec.

152(c)(4)(B)(ii).




      2
       (...continued)
provides specific rules when multiple taxpayers are claiming the same child as a
qualifying child. Sec. 152(c)(4)(A) applies when those multiple claimants are any
two or more taxpayers, and sec. 152(c)(4)(B) applies when those competing
claimants are two parents of the child.
                                          -9-

      Petitioner satisfies the relationship,3 age, support, and no joint return

requirements with respect to a qualifying child under section 152(c)(1).

Respondent, however, asserted that petitioner failed the residency test because the

children lived with Ms. Bruce for a longer period during 2010. Petitioner credibly

testified that he resided with the children for most of 2010, first in Navy housing

and then at his mother’s house and his mother-in-law’s home until he left in

December 2010. As indicated, petitioner’s absence due to military service is not

considered an absence that would otherwise cause him to fail the residency test.

Accordingly, the children lived most of 2010 with both parents and thus meet the

qualifying child test under section 152(c)(1) for both petitioner and Ms. Bruce.4

      Because petitioner and Ms. Bruce could both claim the same children as

their qualifying children and they indeed claimed the children as dependents on

their separate Federal income tax returns, we must look to the tie-breaker rule to

determine who is entitled to claim the children as qualifying children.



      3
        “Child” is defined in sec. 152(f) to include a stepson or stepdaughter of the
taxpayer--but neither “stepson” or “stepdaughter” is defined. In Collier v.
Commissioner, T.C. Memo. 2011-126, this Court interpreted “stepdaughter” by
using its ordinary and common meaning. Accordingly, petitioner’s stepdaughter
meets the specific relationship test as a child of the taxpayer under sec.
152(c)(1)(A).
      4
          The remaining requirements of sec. 152(c)(1) are not in dispute.
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      Petitioner must establish either that: (1) the children resided with him

longer than with Ms. Bruce for 2010 under section 152(c)(4)(B)(i), or (2) if they

resided with both parents for the same amount of time, he had the higher AGI.

The record indicates that petitioner left his mother-in-law’s house in December

2010, and it appears that the children remained with Ms. Bruce at that time.

Therefore, the children resided with Ms. Bruce for a slightly longer period during

2010. Consequently, even though each parent could claim the children as

qualifying children, the children are treated as Ms. Bruce’s qualifying children for

2010 pursuant to section 152(c)(4)(B)(i). Therefore, petitioner is not entitled to

the dependency exemption deductions for the children for 2010.

IV.   Child Tax Credits

      Taxpayers are allowed a credit against their income tax for each qualifying

child for whom the taxpayer was allowed a dependency exemption deduction

under section 151. Sec. 24(a). Petitioner is not entitled to dependency exemption

deductions with respect to the children for 2010; thus, he is not entitled to the

child tax credit or the additional child tax credit for each child for the 2010 taxable

year. See sec. 24(d).
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V.    Earned Income Credit

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

offset that individual’s tax liability. To be considered an eligible individual, a

married taxpayer must file a joint return. Sec. 32(d). Because petitioner was

married during 2010 and is not entitled to joint return filing status for 2010, he is

not an eligible individual under section 32(a)(1). Thus, he is not entitled to the

EIC for 2010.

VI.   Accuracy-Related Penalty

      Section 6662(a) and (b)(1) and (2) authorizes the Commissioner to impose a

penalty equal to 20% of the portion of an underpayment of tax that is attributable

to the taxpayer’s negligence, disregard of rules or regulations, or substantial

understatement of income tax. The Commissioner bears the initial burden of

production with respect to the taxpayer’s liability for the section 6662(a) penalty.

Sec. 7491(c). The Commissioner must introduce sufficient evidence “indicating

that it is appropriate to impose the relevant penalty.” Higbee v. Commissioner,

116 T.C. 438, 446 (2001). If the Commissioner satisfies his initial burden of

production, the burden of producing evidence to refute the Commissioner’s

evidence shifts to the taxpayer, and the taxpayer must prove that the penalty does

not apply. Id. at 447.
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      For the purposes of section 6662, “negligence” includes any failure to make

a reasonable attempt to comply with the Code, including any failure to keep

adequate books and records or to substantiate items properly. See sec. 6662(c);

sec. 1.6662-3(b)(1), Income Tax Regs. A “substantial understatement” includes

an understatement of income tax that exceeds the greater of 10% of the tax

required to be shown on the return or $5,000. See sec. 6662(d)(1)(A); sec. 1.6662-

4(b), Income Tax Regs.

      The section 6662(a) accuracy-related penalty does not apply with respect to

any portion of an underpayment if the taxpayer proves that there was reasonable

cause for such portion and that he or she acted in good faith with respect thereto.

Sec. 6664(c)(1). The determination of whether a taxpayer acted with reasonable

cause is made on a case-by-case basis, taking into account all pertinent facts and

circumstances. Sec. 1.6664-4(b)(1), Income Tax Regs. The most important factor

in determining reasonable cause and good faith is the extent of the taxpayer’s

effort to assess his or her proper income tax liability. Id.; see also Woodsum v.

Commissioner, 136 T.C. 585, 591 (2011).

      Respondent determined that petitioner was liable for the accuracy-related

penalty for 2010 because he was negligent or because he substantially understated

his income tax. Respondent has satisfied his burden by producing evidence that
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petitioner filed a joint return without the consent or authorization of his spouse

and that he failed to include his spouse’s income or deductions. Respondent

further demonstrated that the understatement of $6,804 exceeds $5,000, which is

greater than 10% of the tax required to be shown on the return.5 In this case the

understatement of income tax is computed in the same manner as and is equal to

the deficiency in dispute; that is, $6,804. See secs. 6211, 6662(d)(2).

      The record reflects that although petitioner filed a 2010 joint return without

the express consent of his wife, he typically took care of the tax return preparation

during the marriage. The record reflects that Ms. Bruce presumed petitioner

would file their return and did not otherwise object when she learned that he had

in fact filed a return. Ms. Bruce later provided her bank account information to

petitioner after he had mentioned apportioning the refund they were due. Further,

petitioner credibly testified that he believed Ms. Bruce did not have her own

income in 2010 and that it was reasonable for him to believe that a joint filing

would be beneficial to the couple. Although petitioner’s initial joint return was

adjusted by the IRS as a result of the later separate return timely filed by Ms.

Bruce, petitioner has demonstrated that he acted in good faith at the time the return

was filed and has also shown that he had reasonable cause for filing the return as

      5
          Petitioner’s original 2010 tax return reflected tax due of zero.
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married filing jointly. Therefore, petitioner is not liable for the accuracy-related

penalty.

VII. Conclusion

      For the foregoing reasons, the Court sustains respondent’s determinations

that petitioner is not entitled to the status of married filing jointly, the claimed

dependency exemption deductions, the EIC, the child tax credit, and the additional

child tax credit for tax year 2010. The Court does not sustain respondent’s

imposition of the accuracy-related penalty under section 6662(a) for tax year 2010.

      We have considered all of the parties’ arguments, and, to the extent not

addressed herein, we conclude that they are moot, irrelevant, or without merit.

      To reflect the foregoing,


                                                  Decision will be entered for

                                         respondent as to the deficiency and

                                         for petitioner as to the accuracy-

                                         related penalty under section 6662(a).
