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Tuesday, March 18, 2003

 


Yea! Pro se taxpayer Larry Allen Coats won a claim for earned income credit denied by the IRS! IRS had also denied Head of Household filing status and dependency exemptions for two children. By the time this decision was issued, IRS had admitted that he qualified for the earned income credit for a person with no qualifying children, that he was entitled to the dependency exemption for one child, and that Head of Household filing status has not tax consequences, and is therefore moot.

Mr. Coats claimed two children as qualifying children for the earned income tax credit, one of whom was his biological daughter, the other of whom was neither his biological or adopted daughter. The elementary school that the girls attended listed their address as that of their mutual biological mother, who lived a half mile from the school. Mr. Coats lived 13 miles from the school. IRS considered these facts sufficient to establish that the girls lived with the mother more than half the year, regardless of what Mr. Coats told them. Since a child must live with the taxpayer more than half the year to meet the residency test to be a qualifying child for the earned income credit, the IRS denied that Mr. Coats was entitled to earned income credit for a person with a qualifying child. Tax Court Judge Nims, however, is apparently aware that the poor tend not to lead particularly stable lives, and believed Mr. Coats� testimony that due to volatility in the neighborhood and concern for the children�s well-being, the children stayed with Mr. Coats for 9 months during the year and commuted to school because the parents did not want to disrupt their education.

Unfortunately for Mr. Coats, however, while his biological daughter meets the relationship test to be a qualifying child, a child who his not his biological or adopted child must be and �eligible foster child�, which requires living with the taxpayer the entire year. So Tax Court determined that Mr. Coats is entitled to earned income credit for an individual with one qualifying child.



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