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During the year in issue, petitioner was employed by Wesley
Health Care Center, Inc., in Saratoga Springs, New York. She
electronically filed her 1997 Federal income tax return on April 15,
1998, reporting wage income of $11,375. She reported her filing
status as single and claimed dependency exemptions for Christina and
Mitchell, identifying them as “qualifying children” for purposes of
claiming a $3,656 earned income credit. (For purposes of claiming
this credit, petitioner’s modified adjusted gross income for 1997
was $11,375.)
On his 1997 Federal income tax return, Mr. Pancake claimed an
earned income credit for Alyssa. For purposes of claiming this
credit, Mr. Pancake’s 1997 modified adjusted gross income was higher
than petitioner’s. (Mr. Pancake identified neither Christina nor
Mitchell as his qualifying children for purposes of claiming this
credit on his return.)
Respondent disallowed the earned income credit petitioner
claimed on her 1997 return, explaining in the notice of deficiency:
All the children qualify both Penny and John for the
earned income credit. Mitchell and Christina qualify as
foster children for John. They do not have to be related
to him to be qualifying children. They lived as a family
in the same home the entire year and therefore are his
qualifying children for the earned income credit.
Because Penny’s income is not the highest, we have not
allowed her earned income credit.
John may amend his return to list two qualifying children
for the earned income credit is [sic] he wishes.
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