                               T.C. Memo. 2018-5



                        UNITED STATES TAX COURT



                   MICHELLE KEEL, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



      Docket No. 1410-17.                         Filed January 16, 2018.



      Michelle Keel, pro se.

      Donielle A. Hubbard, Horace Crump, and Edwin B. Cleverdon for

respondent.



                          MEMORANDUM OPINION



      BUCH, Judge: This case is before us on the Commissioner’s motion for

summary judgment. The issue is whether Ms. Keel’s 2015 tax liability must

increase by the amount of the advance premium assistance tax credit that was
                                       -2-

[*2] applied to her monthly health insurance premium. Because Ms. Keel’s

income exceeded 400% of the Federal poverty line, Ms. Keel was not entitled to

the credit, and we will grant the Commissioner’s motion for summary judgment.

                                   Background

        During 2015 Ms. Keel received benefits under the Affordable Care Act. On

the basis of her estimated household income, Ms. Keel was eligible for an advance

premium assistance tax credit of $335 a month to be applied to her monthly health

insurance premium. These payments were made on her behalf beginning in March

2015.

        Ms. Keel earned $39,210 for 2015 from Sweet OM Yoga, Inc. In 2015

Bank of America discharged a $16,163 debt owed by Ms. Keel. The amount of

discharged debt generally is treated as income, and this discharge increased Ms.

Keel’s 2015 income to over $55,000. In 2014, 400% of the Federal poverty line

for a family of one residing in Alabama was $46,680. Including the discharged

debt in Ms. Keel’s income put her over that limit.

        On her 2015 Federal income tax return Ms. Keel reported $12,000 of wage

income, $27,210 of income on Schedule E, Supplemental Income and Loss, and
                                         -3-

[*3] $16,164 of cancellation of indebtedness income.1 Ms. Keel did not attach

Form 8962, Premium Tax Credit, to her 2015 tax return. That form is used to

reconcile the amount of the advance premium assistance tax credit the taxpayer

received with the amount of the premium assistance tax credit the taxpayer is

entitled to.

       On October 11, 2016, the Commissioner issued a notice of deficiency to Ms.

Keel. The only adjustment in that notice of deficiency was to disallow the $3,350

advance premium assistance tax credit, the effect of which was to increase her tax

liability by the amount of that disallowed credit. Ms. Keel timely petitioned this

Court while residing in Alabama.

       This case was calendared for trial at the Court’s January 8, 2018,

Birmingham, Alabama, trial session. On October 16, 2017, the Commissioner

filed a motion for summary judgment under Rule 121.2 The Court ordered Ms.

Keel to respond, but she did not do so. Her position as stated in her petition is that




       1
      Ms. Keel reported $16,164 on line 21 of her 2015 tax return, but her Form
1099-C, Cancellation of Debt, shows discharged debt of $16,163.
       2
       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 at issue.
                                            -4-

[*4] the cancellation of indebtedness income should be disregarded when

determining her eligibility for the premium assistance tax credit.

                                        Discussion

         The issue before this Court is whether we should grant the Commissioner’s

motion for summary judgment. Under Rule 121(a), either party may move for

summary judgment regarding all or any part of the legal issues in controversy. We

may grant summary judgment only if there is no genuine dispute as to any material

fact.3

         The party moving for summary judgment bears the burden of demonstrating

that there is no genuine dispute as to any material fact.4 “In deciding whether to

grant summary judgment, the factual materials and the inferences drawn from

them must be considered in the light most favorable to the nonmoving party.”5

When a motion for summary judgment is made and properly supported, the

nonmoving party may not rest on mere allegations or denials, but must set forth




         3
             Rule 121(b); Naftel v. Commissioner, 85 T.C. 527, 529 (1985).
         4
       Sundstrand Corp. v. Commissioner, 98 T.C. 518, 520 (1992), aff’d, 17 F.3d
965 (7th Cir. 1994).
         5
             FPL Group, Inc. v. Commissioner, 115 T.C. 554, 559 (2000).
                                         -5-

[*5] specific facts showing that there is a genuine dispute for trial.6 As a general

matter, the Commissioner’s determinations in the notice of deficiency are

presumed correct, and the taxpayer bears the burden of proving an error.7

      The Commissioner determined that Ms. Keel was not entitled to the advance

premium assistance tax credit payments made on her behalf for 2015.8 Ms. Keel

does not dispute that these payments were made on her behalf or that her income

was above 400% of the Federal poverty line. Instead, she argues that her

cancellation of indebtedness income should not be included when calculating her

income for purposes of determining whether she is eligible to receive the premium

assistance tax credit.

      The premium assistance tax credit is intended to offset the cost of health

insurance. A recipient of the premium assistance tax credit can choose to receive

the benefits of these payments in advance.9 These credits are paid directly to the

insurer in the form of monthly payments based on advance eligibility


      6
          Rule 121(d).
      7
          Rule 142(a); Welch v. Helvering, 290 U.S. 111, 115 (1933).
      8
       See McGuire v. Commissioner, 149 T.C.          ,   (slip op. at 3) (Aug. 28,
2017), for a full discussion of eligibility requirements.
      9
       Patient Protection and Affordable Care Act (ACA), Pub. L. No. 111-148,
sec. 1412(a), 124 Stat. at 231.
                                          -6-

[*6] determinations.10 The insurers who receive the payments are required to

reduce the premium charged to the insured by the amount of the advance premium

assistance tax credit received.11 The insurers also must notify the Secretary of

Health and Human Services of the reduction in the premiums and include this

amount in the billing statements to the insured.12

      Sometimes circumstances change, and a taxpayer’s annual income might be

more or less than the estimate that was used when the advance premium assistance

tax credit was determined. At the end of the year a taxpayer who receives an

advance premium assistance tax credit must reconcile the amount of the credit

received (i.e., the premiums paid with the advance credits) with the eligible credit

amount.13 This is done when the taxpayer files his or her annual income tax

return. If the amount of the advance premium assistance tax credit is more than

the amount to which the taxpayer is ultimately entitled, the taxpayer owes the

excess credit back to the Government, and it is reflected as an increase in tax.14 A


      10
           ACA sec. 1412(c)(2)(A).
      11
           ACA sec. 1412(c)(2)(B).
      12
           ACA sec. 1412(c)(2)(B)(ii) and (iii).
      13
           Sec. 36B(f).
      14
           Sec. 36B(f)(2).
                                         -7-

[*7] taxpayer with income greater than 400% of the Federal poverty line is not

eligible for the credit, and the full amount of the advance premium assistance tax

credit received during the year must be included as a tax liability with the tax

return.15 During 2014 the Federal poverty line was $11,670 for a one-person

household in Alabama and 400% of the Federal poverty line was $46,680.16

      Ms. Keel argues that her cancellation of indebtedness income should not be

included when calculating her household income for purposes of the premium

assistance tax credit. As pertinent here, household income is defined as the

modified adjusted gross income of the taxpayer.17 Gross income includes income

from the discharge of indebtedness.18 And while there are adjustments to gross

income for the purpose of determining modified adjusted gross income, none of

those adjustments is relevant here.19 Accordingly, Ms. Keel’s cancellation of

indebtedness income is included in calculating her modified adjusted gross income

for purposes of the premium assistance tax credit.


      15
           Sec. 36B(f)(2); sec. 1.36B-4(a)(4), Example (5), Income Tax Regs.
      16
           See sec. 36B(d)(3)(B).
      17
           Sec. 36B(d)(2)(A)(i), (ii).
      18
           Sec. 61(a)(12).
      19
           Sec. 36B(d)(2)(B).
                                       -8-

[*8] Ms. Keel received an advance premium assistance tax credit in 2015 based

on her projected income. But when Bank of America discharged Ms. Keel’s debt

of $16,163, her income rose above 400% of the Federal poverty line. Because Ms.

Keel’s household income exceeded that threshold, she is not entitled to any of the

advance premium assistance tax credit that she received.

      To reflect the foregoing,


                                                   An appropriate order and

                                             decision will be entered for

                                             respondent.
