The Tax Court in Brief February 14 – February 18, 2022

Freeman Law’s “The Tax Court in Brief” covers every substantive Tax Court opinion, providing a weekly brief of its decisions in clear, concise prose.

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Tax Litigation: The Week of February 14 – February 18, 2022

Ola-Buraimo v. Comm’r, T.C. Summary Opinion 2022-2 | February 14, 2022  | Guy, J. | Dkt. No. 8633-20SL

Opinion

Short Summary: Petitioner’s former spouse had sole custody and control of their children, although Petitioner had visitation rights. Petitioner claimed a dependency exemption for one of the children as well as a dependent-related earned income credit. In his returns, Petitioner failed to include a Form 8332, Release/Revocation of Claim to Exemption for Child by Custodial Parent, signed by former spouse. A deficiency was issued as the IRS believed Petitioner was not entitled to the dependency exemption, and Petitioner challenged that finding.

Primary Holdings:

  • Petitioner presented no evidence that any of the children met the definition of “qualifying child” during the tax years in issue. And, Petitioner did not include a declaration signed by the custodial parent (Form 8332). Therefore, Petitioner was not entitled to a dependency exemption or any dependent-related earned income credit.

Key Points of Law:

  • Any person receiving a notice of proposed levy may request an administrative hearing with the Appeals Office. The Appeals Office is obliged to verify that the requirements of any applicable law or administrative procedure have been met. See 26 U.S.C. § 6330(c)(1), (3)(A). The person may raise any relevant issue relating to the unpaid tax or the collection action. See id. at § 6330(c)(2)(B). Also, the Appeals Office must consider whether the collection action balances the need for efficient collection against the person’s concern that collection be no more intrusive than necessary. Id. at § 6330(c)(3)(C).
  • An individual is allowed a deduction for an exemption for “each individual who is a dependent of the taxpayer for the taxable year.” 26 U.S.C. § 151(c). “Dependent” includes “a qualifying child,” and to so qualify, the child must: (1) bear a specified relationship to the taxpayer (e.g., be a child of the taxpayer), (2) have the same principal place of abode as the taxpayer for more than one-half of such taxable year, (3) meet certain age requirements, (4) not have provided over one-half of such individual’s support for the taxable year, and (5) not have filed a joint return for that year. See 26 U.S.C. § 152(c)(1)-(c)(1)(E).
  • In the case of divorced parents, special rules apply to determine which parent may claim a dependency exemption deduction for a child. When certain criteria are met, a child may be treated as a qualifying child of the noncustodial parent rather than of the custodial parent. See 26 U.S.C. § 152(e)(1)-(2) (qualification criteria); Reg. § 1.152-4(a)-(d). Key criteria include 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,” and “the noncustodial parent [must] attach[]such written declaration to the noncustodial parent’s return” for the relevant taxable year. See 26 U.S.C. § 152(e)(2)(A)-(B).
  • Section 32(a)(1) provides an eligible individual with an earned income credit against the individual’s income tax liability. The amount of the credit to which an eligible individual is entitled increases if the individual has a qualifying child, as defined in Section 152(c), and determined without regard to the special rule for waiver from the custodial parent under section 152(e).
  • An unmarried individual is considered a head of a household only if the individual maintains as his home a household which constitutes for more than one-half of the taxable year the principal place of abode of a qualifying child of the individual (as defined in section 152(c)). 26 U.S.C. § 2(b)(1)(A)(i).
  • A Tax Court decision issued pursuant to Section 7463(b) is not reviewable by any other court, and the opinion shall not be treated as precedent for any other case.

Insights: When a non-custodial parent requests a dependency exemption for a child, the person should be prepared to show that the child is, under law, a “qualifying child,” and the taxpayer should obtain and submit with his or her returns, an IRS Form 8332, Release/Revocation of Claim to Exemption for Child by Custodial Parent, signed by former spouse.

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