                  T.C. Summary Opinion 2008-51



                      UNITED STATES TAX COURT



              RICARDO AVILA BELTRAN, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 1812-07S.               Filed May 5, 2008.


     Ricardo Avila Beltran, pro se.

     Fred E. Green, Jr., for respondent.



     WHERRY, Judge:   This case was heard pursuant to the

provisions of section 7463 of the Internal Revenue Code in effect

when the petition was filed.1   Pursuant to section 7463(b), the

decision to be entered is not reviewable by any other court, and




     1
      Unless otherwise indicated, all section references are to
the Internal Revenue Code of 1986, as in effect for the year in
issue, and all Rule references are to the Tax Court Rules of
Practice and Procedure.
                                 - 2 -

this opinion shall not be treated as precedent for any other

case.

     This case is before the Court on a petition for

redetermination of a deficiency.    After concessions by

respondent,2 the issues for decision are whether petitioner is

entitled to the following:   (1) Head of household filing status,

(2) two child tax credits, and (3) an earned income tax credit.

                             Background

     Some of the facts have been stipulated.    The stipulations,

with accompanying exhibits, are incorporated herein by this

reference.   At the time the petition was filed petitioner resided

in Nevada.

     Petitioner’s second cousin and her two sons OPP and JPP,3

lived with petitioner in 2005.    Petitioner provided support for

his second cousin, OPP, and JPP, which included paying rent,

utilities, and medical bills and providing food and clothing.

     Petitioner filed his 2005 Form 1040A, U.S. Individual Income

Tax Return, as head of household and claimed three exemptions,

one for himself and dependency exemptions for OPP and JPP.

Petitioner also claimed a child tax credit, an additional child




     2
      At trial, respondent conceded that petitioner was entitled
to dependency exemptions for OPP and JPP.
     3
      The Court will refer to the minor children by their
initials.
                              - 3 -

tax credit, and an earned income tax credit.    Petitioner’s Form

1040A reflected that he had $22,256 in wages.

     In a notice of deficiency mailed to petitioner on

October 23, 2006, respondent: (1) Disallowed the dependency

exemption deductions for OPP and JPP, (2) changed petitioner’s

filing status from head of household to single and adjusted the

standard deduction accordingly, (3) disallowed the child tax

credits, and (4) disallowed the earned income credit.    As a

result, respondent determined a deficiency of $5,943.    Petitioner

timely petitioned this Court, and a trial was held on November 6,

2007, in Reno, Nevada.

                           Discussion

     Deductions are a matter of legislative grace, and the

taxpayer must maintain adequate records to substantiate the

amounts of any deductions or credits claimed.    Sec. 6001;

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

sec. 1.6001-1(a), Income Tax Regs.    As a general rule, the

Commissioner’s determination of a taxpayer’s liability in the

notice of deficiency is presumed correct, and the taxpayer bears

the burden of proving that the determination is improper.      See

Rule 142(a); Welch v. Helvering, 290 U.S. 111, 115 (1933).
                                - 4 -

I.     Head of Household Filing Status

       Section 1(b) provides a special lower tax rate (as compared

to the individual tax rate) for an individual filing his Federal

tax return as a head of household.      Section 2(b) defines a “head

of household” as an individual taxpayer who:     (1) Is unmarried at

the close of the taxable year and is not a surviving spouse, and

(2) maintains as his home a household which constitutes for more

than one-half of the taxable year the principal place of abode of

either a qualifying child or a dependent of the taxpayer with

respect to whom the taxpayer is allowed a deduction under section

151.    Sec. 2(b)(1)(A)(i) and (ii).

       The definition of head of household is limited by section

2(b)(3), which provides:

            (3) Limitations.–-Notwithstanding paragraph (1),
       for purposes of this subtitle a taxpayer shall not be
       considered to be a head of a household--

                 (A) if at any time during the taxable year he
            is a nonresident alien; or

                  (B) by reason of an individual who would
            not be a dependent for the taxable year but
            for--

                      (i) subparagraph (H) of section 152(d)(2), or

                      (ii) paragraph (3) of section 152(d).

Section 152 defines a dependent as a qualifying relative who, as

relevant here, bears a relationship to the taxpayer in one of the

ways enumerated in section 152(d)(2)(A) through (H).     Section

152(d)(2)(H) provides in pertinent part:     “An individual * * *
                               - 5 -

who, for the taxable year of the taxpayer, has the same principal

place of abode as the taxpayer and is a member of the taxpayer’s

household.”   OPP and JPP qualified through section 152(d)(2)(H)

as dependents of petitioner for purposes of section 151, and as a

result, section 2(b)(3)(B)(i) disqualifies petitioner from head

of household filing status.4


     4
      OPP and JPP do not bear any of the relationships listed in
sec. 152(d)(2) with respect to petitioner, other than
subpar. (H). Sec. 152(d)(2) lists the following relationships:


          (A) A child or a descendant of a child.

          (B) A brother, sister, stepbrother, or stepsister.

          (C) The father or mother, or an ancestor of
     either.

          (D) A stepfather or stepmother.

          (E) A son or daughter of a brother or sister of
     the taxpayer.

          (F) A brother or sister of the father or mother of
     the taxpayer.

          (G) A son-in-law, daughter-in-law, father-in-law,
     mother-in-law, brother-in-law, or sister-in-law.

          (H) An individual (other than an individual who at
     any time during the taxable year was the spouse,
     determined without regard to section 7703, of the
     taxpayer) who, for the taxable year of the taxpayer,
     has the same principal place of abode as the taxpayer
     and is a member of the taxpayer’s household.

     Petitioner testified: “But in Mexico our beliefs, * * * [if
they are the children of] my cousin, then they are my children.
As far as they [are] my cousin then they are my children.” While
petitioner’s support of OPP and JPP is certainly commendable, OPP
                                                   (continued...)
                               - 6 -

      Accordingly, petitioner is not entitled to head of household

filing status for 2005.

II.   Child Tax Credits

      Section 24(a) authorizes a child tax credit with respect to

each “qualifying child” of the taxpayer.    A “qualifying child”

means an individual who meets the requirements of section 152(c)

and who has not attained the age of 17.    Sec. 24(c)(1).   Section

152(c) provides in pertinent part:

           (1) In general.–-The term “qualifying child”
      means, with respect to any taxpayer for any taxable
      year, an individual--

                (A) who bears a relationship to the taxpayer
           described in paragraph (2),

                (B) who has the same principal place of
           abode as the taxpayer for more than one-half
           of such taxable year,

                (C) who meets the age requirements of
           paragraph (3), and

                (D) who 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.

           (2) Relationship.--For purposes of paragraph
      (1)(A), an individual bears a relationship to the
      taxpayer described in this paragraph if such individual
      is--


      4
      (...continued)
and JPP qualify as dependents only through sec. 152(d)(2)(H)
because they are not his children, stepchildren, or foster
children but are, in fact, the children of petitioner’s second
cousin. See also sec. 152(f)(1)(C) (defining eligible foster
child as an individual placed with the taxpayer by an authorized
placement agency or by court order).
                                - 7 -

               (A) a child of the taxpayer or a descendant
     of such a child, or

               (B) a brother, sister, stepbrother, or
     stepsister of the taxpayer or a descendant of any such
     relative.

Neither OPP nor JPP satisfies the section 152(c)(2) relationship

test as their mother is petitioner’s second cousin.   Accordingly,

neither OPP nor JPP fits within the meaning of “qualifying child”

as defined by section 24(c).    Therefore, the Court concludes that

petitioner is not entitled to a child tax credit for either OPP

or JPP for 2005.

III. Earned Income Credit

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

income credit against the individual’s income tax liability.

Section 32(a)(2) limits the credit allowed through a phaseout,

and section 32(b) prescribes different percentages and amounts

used to calculate the credit.   The limitation amount is based on

the amount of the taxpayer’s earned income and whether the

taxpayer has no children, one qualifying child, or two or more

qualifying children.

     To be eligible to claim an earned income credit with respect

to a child, the taxpayer must establish that the child is a

“qualifying child” of the taxpayer as defined in section 152(c).5



     5
      Sec. 152(c)(1)(D) and (e) is disregarded in determining
whether an individual is a “qualifying child” for purposes of
sec. 32. Sec. 32(c)(3)(A).
                                   - 8 -

Sec. 32(c)(3)(A).    Neither OPP nor JPP is a “qualifying child”

under section 152(c), as discussed supra.

       Although petitioner is not eligible to claim an earned

income credit under section 32(c)(1)(A)(i) for one or more

qualifying children, he may be an “eligible individual” under

section 32(c)(1)(A)(ii).    For 2005 a taxpayer is eligible under

this subsection only if his or her adjusted gross income was less

than $11,750.    Rev. Proc. 2004-71, sec. 3.06, 2004-2 C.B. 970,

973.    Petitioner’s adjusted gross income for 2005 was $22,256.

Accordingly, petitioner is not eligible for an earned income

credit for 2005.

       The Court has considered all of petitioner’s contentions,

arguments, requests, and statements.       To the extent not discussed

herein, the Court concludes that they are meritless, moot, or

irrelevant.

       To reflect the foregoing,


                                             Decision will be entered

                                        under Rule 155.
