Cynthia L. Rowe v. Commissioner , 128 T.C. No. 3 ( 2007 )

128 T.C. No. 3UNITED STATES TAX COURT
CYNTHIA L. ROWE, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 17856-04. Filed February 22, 2007.
P and her two young children lived together in 2002
until her arrest on June 5. P continued to support her
children after her arrest until July 2, but P was confined
in jail for the rest of the year.
P claimed an earned income credit (EIC) on her Federal
income tax return for 2002 and received an EIC of $1,070.
R then denied the EIC, claiming that P did not have the same
principal place of abode as her children for more than half
of the year. P argues that, although she was jailed for the
rest of 2002 after her arrest on June 5, the home where she
lived with her children before her arrest still constituted
the principal place of abode for her and her children for
all of 2002.
Held: P is eligible for the EIC for 2002. P’s absence
due to being held in jail after her arrest does not prevent
her from qualifying for the EIC.
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Cynthia L. Rowe, pro se.
Kelly A. Blaine, for respondent.
OPINION
KROUPA, Judge: Respondent determined a $1,070 deficiency in
petitioner’s Federal income tax for 2002. The issue to be
decided is whether petitioner is eligible to claim an earned
income credit (EIC) in 2002. We hold that she is.
Background
This case was fully stipulated under Rule 122.1 The
stipulation of facts and the attached exhibits are incorporated
by this reference. Petitioner was incarcerated in the Coffee
Creek Correctional Facility in Wilsonville, Oregon, when she
filed the petition.
Petitioner and her two children lived together for the first
part of 2002, first at a home on Marcum Lane in Eugene, Oregon,
and then at the home of petitioner’s mother-in-law. Petitioner
was arrested on June 5, 2002, and was held in jail for the
remainder of the year. The father of petitioner’s two children
moved into his mother’s home to care for the children after
petitioner was arrested.
1
All section references are to the Internal Revenue Code in
effect at all relevant times, and all Rule references are to the
Tax Court Rules of Practice and Procedure, unless otherwise
indicated.
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Petitioner supported herself and her children in 2002 with
wages, unemployment benefits, food stamps, and welfare medical
assistance until she was arrested. Petitioner continued to
support her children even after her arrest until July 2, 2002,
when the Children’s Services Division of the State of Oregon
began providing petitioner’s children financial and medical
assistance in their own names. Petitioner was ultimately
convicted of murder in 2003 and is presently serving a life
sentence at the Coffee Creek Correctional Facility. Petitioner’s
conviction was pending on appeal when this case was submitted.
Petitioner timely filed a Federal income tax return for 2002
claiming head of household status. She claimed her children as
dependents and also claimed an EIC. She stated on Schedule EIC,
Earned Income Credit, that she lived with her children for more
than half of 2002 but less than 7 months. Petitioner received
$1,070 for the EIC.
Respondent issued petitioner a deficiency notice concluding
that petitioner was not eligible for the EIC because she did not
share the same principal place of abode with her children for
more than half of 2002.2
2
Respondent also concluded that petitioner was not eligible
to file as head of household or to claim dependency exemptions
for her children. Respondent’s disallowance of the head of
household filing status had no effect on petitioner’s tax
liability for 2002 because her standard deductions and exemptions
exceeded her adjusted gross income. Respondent has since
(continued...)
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Petitioner timely filed a petition and, at the Court’s
direction, an amended petition complying with the Court’s Rules.
Discussion
We are asked to decide whether petitioner is eligible for
the EIC. We begin by explaining the EIC in general terms. An
eligible individual is entitled to an EIC against the
individual’s income tax liability, subject to certain
requirements. Sec. 32(a)(1). Different percentages and amounts
are used to calculate the credit depending on whether the
eligible individual has no qualifying children, one qualifying
child, or two or more qualifying children. Sec. 32(b).
Petitioner claims the EIC with respect to two or more
qualifying children. Certain requirements must be met to be
eligible to claim an EIC with respect to qualifying children.
Respondent concedes that petitioner has satisfied the age,
identification, and relationship requirements with respect to her
two children. See sec. 32(c)(3). The issue in dispute concerns
the residency requirement. The residency requirement mandates
that the taxpayer and the children must share the same principal
place of abode for more than half of the taxable year for which
the EIC is claimed. Sec. 32(c)(3).
2
(...continued)
conceded that petitioner was eligible to claim the dependency
exemptions for her children.
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Respondent argues that petitioner and her children did not
satisfy the residency requirement because petitioner was held in
jail for the rest of the year after her arrest on June 5.
Petitioner, on the other hand, argues that she and her children
satisfied the residency requirement. Petitioner asserts that she
resided with her children in 2002, first at the Marcum Lane home
and then at her mother-in-law’s home. She argues that her
mother-in-law’s home was the residence for her and her children
from the day they moved there through the rest of the year.
Petitioner essentially asserts that, although she was arrested on
June 5 and held in jail for the remainder of the year, her
absence was temporary. We agree with petitioner.
A. The “Same Principal Place of Abode” Test
We now examine the residency requirement that a taxpayer and
his or her children must share the “same principal place of
abode” for more than half the year for which the EIC is claimed.
We also consider what types of absences from the home are
permitted while still allowing the home to qualify as the
principal place of abode. Sec. 32(c)(3).
The phrase “same principal place of abode” is not defined in
section 32 or the regulations under that section. The
legislative history of section 32, however, provides some
guidance on the meaning of this phrase, and, specifically, how
Congress intended absences from the home to be treated. Congress
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intended that rules similar to those for determining head of
household filing status under section 1(b) should apply in
determining whether the residency requirement of the EIC is met.
H. Conf. Rept. 101-964, at 1037 (1990), 1991-2 C.B. 560, 564.
Congress also stated that certain temporary absences, such as
those for education or illness, should not be counted against
taxpayers in determining whether taxpayers lived with a
qualifying child for more than half the taxable year for which
the EIC is claimed. Id.B. Head of Household Filing Status Provisions
We accordingly look to the head of household filing status
provisions for guidance on how absences from the home are to be
treated in determining the principal place of abode. See id.The head of household provisions contain certain requirements for
a taxpayer to file a tax return as a head of household. Sec.
2(b). One requirement is that the taxpayer must maintain as his
or her home a household that constitutes the principal place of
abode for a qualifying child or certain other persons for more
than half the year. Sec. 2(b)(1)(A).
Regulations under this section further elaborate on the
treatment of absences from the home. Sec. 1.2-2(c)(1), Income
Tax Regs. While the taxpayer must live in the household and not
simply maintain it, temporary absences, generally out of
necessity, are permitted under certain circumstances. Id.; see
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Prendergast v. Commissioner, 57 T.C. 475, 480 (1972), affd. 483
F.2d 970 (9th Cir. 1973). Nonpermanent failures to occupy the
home for reasons such as illness, education, business, vacation,
military service, or a custody agreement do not cause a taxpayer
to lose head of household filing status. Sec. 1.2-2(c)(1),
Income Tax Regs. A taxpayer may still have the same principal
place of abode despite a temporary absence if it is reasonable to
assume that the taxpayer will return to the household and the
taxpayer continues to maintain the household during the temporary
absence. Id.C. Pre-Conviction Incarceration as a Temporary Absence
We next consider how an absence from the home due to jail
confinement after an arrest (but before a conviction or other
case disposition) should be treated, taking into account the
guidance provided by the head of household regulations. Absence
due to jail confinement after an arrest is not one of the
permitted or listed absences under the head of household
regulations. Failure of this type of absence to be included in
the list, however, is not fatal to petitioner’s case. Congress
intended for similar, not identical, rules to apply to determine
whether the residency requirement is met for EIC purposes. See
H. Conf. Rept. 101-964, supra at 1037, 1991-2 C.B. at 564. Also,
we have previously indicated that the list of reasons for a
nonpermanent failure to occupy the home in the regulations is not
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an exclusive list. Prendergast v. Commissioner, supra at 480.
Rather, we found that the list is only a guide for distinguishing
temporary absences for necessitous reasons from more permanent
absences for nonnecessitous reasons. Id.
Jail confinement after an arrest but before conviction is a
type of absence that is of a necessitous variety and also
nonpermanent. An individual confined in jail after being
arrested has a unique, temporary status. The criminal process
will continue through several stages, which may include charging,
possible plea bargaining, trial, conviction, sentencing, and
appeal, each of which will directly affect the individual’s
status. These subsequent stages of the criminal process after
arrest will determine whether the arrested person is ultimately
incarcerated or released. We find that an individual confined in
jail after an arrest but before conviction is necessarily, but
nonpermanently, absent from his or her home. Such an individual
generally intends to return home, just as an individual in
military service or afflicted by illness intends to return home
once he or she is able. Thus, the necessary, nonpermanent
absence of jail confinement is similar to those examples listed
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in the head of household regulations.3 See id.; sec. 1.2-
2(c)(1), Income Tax Regs.
D. Reasonableness of Assumption That Petitioner Would
Return
Temporary absences, like those outlined in the regulations
as well as jail confinement after an arrest, are permitted if it
is reasonable to assume the taxpayer will return to his or her
home after the temporary absence. See sec. 1.2-2(c)(1), Income
Tax Regs. We therefore now consider whether it is reasonable to
assume that petitioner, who was temporarily absent from her home
in 2002 due to her arrest and jail confinement but before her
conviction, would return to her home.
We have previously established factors to rely on in making
this determination. Hein v. Commissioner, 28 T.C. 826 (1957).
In Hein, we were asked to consider whether a taxpayer and his 72-
year-old sister, Emilie, had the same principal place of abode.
Id. at 830. The taxpayer and Emilie had lived together for
approximately 30 years, but Emilie had been confined in a mental
health facility for the 6 years before the year at issue and
therefore was absent from the taxpayer’s home during the year at
3
We also note that the Commissioner has indicated that
“detention in a juvenile facility” is a temporary absence that
counts as time lived at home for purposes of the EIC. See Serv.
Ctr. Advice 200002043 (Jan. 14, 2000); 2002 Instructions to Form
1040, line 64, Earned Income Credit; cf. sec. 1.6015-3(b)(3),
Income Tax Regs. (spouse’s temporary absence from household due
to incarceration does not prevent spouses from being considered
members of the same household).
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issue. Id. at 828. In finding that the taxpayer and Emilie had
the same principal place of abode, we focused on the taxpayer’s
and Emilie’s intent that Emilie would return to the taxpayer’s
home if she were released. Id. at 834-835. Moreover, even
though it was unlikely that Emilie would ever recover her health
and leave the facility, we emphasized that there were no
indications that Emilie had chosen a new permanent habitation.
Id.We apply the factors we set forth in Hein to the
circumstances here and conclude that it was reasonable to assume
petitioner would return to her home with her children. The
criminal case against petitioner was still pending at the end of
2002 and she had not been convicted. As in Hein, there are no
indications in the record that petitioner intended to choose a
new home. See id. In fact, petitioner refers to her mother-in-
law’s home as “my home” in documents she filed with the Court.
We decline to assess objectively the strength of the
criminal charges against petitioner or require petitioner to show
the weakness of the charges against her to determine whether it
was reasonable to assume she would return to her home. Such an
analysis would require us to assess the strengths and weaknesses
of the criminal case against petitioner. In addition, we would
have to consider other factors such as petitioner’s financial
status and assets to estimate whether she could have made bail,
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the likelihood of a plea bargain, or perhaps estimate the length
of a sentence or the likelihood of success on appeal if we found
petitioner likely would have been convicted. These inquiries are
best left to the criminal process to address. We shall not
assess the merits of a criminal case to determine whether a
taxpayer is eligible for the EIC.
We conclude that, although petitioner had been arrested and
was confined in jail through the end of 2002, it was reasonable
to assume she would return to her home because she had not chosen
a new home. Accordingly, we find that her temporary absence due
to jail confinement after her arrest but before conviction does
not disqualify her from eligibility for the EIC for 2002.4
We note that our holding will apply only to an
extraordinarily narrow category of taxpayers because Congress has
limited the circumstances in which the EIC is available to
inmates at correctional institutions. Income those inmates earn
is not considered income for EIC purposes. Sec. 32(c)(2)(B)(iv).
Accordingly, any income that petitioner earns while she serves
her sentence as an inmate at a correctional facility is not taken
4
We note that the regulations concerning head of household
filing status also require that taxpayers maintain the household
during their temporary absence in anticipation of returning. We
are not required to consider that requirement in the EIC context.
Maintaining a household is not a requirement of sec. 32. The EIC
rules simply require that the taxpayer and the person to be
treated as a qualifying child have the same principal place of
abode. Secs. 32(c)(3), 152(c).
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into account for EIC purposes. Id. Our holding, therefore,
applies primarily to taxpayers who have earned income outside a
correctional facility for part of a year and are then arrested
and held in jail without conviction for the remainder of the
year.
Congress has chosen to restrict the extent to which inmates
at correctional institutions may obtain the EIC. Id. Absent
direction from Congress, we do not find it appropriate under
these circumstances to further restrict the application of the
EIC also to exclude income a taxpayer earns before incarceration.
E. Conclusion
We hold that petitioner has satisfied the residency
requirement to claim the EIC for 2002.
To reflect the foregoing,
Decision will be entered
for petitioner.
Reviewed by the Court.
COHEN, SWIFT, WELLS, and VASQUEZ, JJ., agree with this
majority opinion.
LARO, FOLEY, GALE, THORNTON, and GOEKE, JJ., concurring in
result only.
CHIECHI, J., did not participate in the consideration of
this case.
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GALE, J., concurring: While I agree with the result reached
in the principal opinion, I believe that, given the very narrow
facts of this case and the opacity of respondent's position, it
should be resolved in petitioner’s favor on the basis that she is
entitled to the benefits of Rev. Rul. 66-28, 1966-1 C.B. 31. In
that ruling, the Commissioner, on analogous narrow facts, treated
an absence from the household as a “temporary absence due to
special circumstances” without regard to whether it was
reasonable to assume that return would occur. In Rauenhorst v.
Commissioner, 119 T.C. 157, 170-173 (2002), we refused to allow
counsel for the Commissioner “to argue * * * against the
principles and public guidance articulated in the Commissioner’s
currently outstanding revenue rulings.” I conclude that
respondent's position in this case is sufficiently at variance
with the principles of Rev. Rul. 66-28, supra, that petitioner
should be permitted to rely on the ruling, given respondent's
failure to address the ruling and distinguish it.
Rev. Rul. 66-28, 1966-1 C.B. at 32, is long-standing public
guidance in which the Commissioner, following this Court's
decision in Hein v. Commissioner, 28 T.C. 826 (1957), ruled that
a “temporary absence due to special circumstances” (as used in
the dependency exemption regulations at section 1.152-1(b),
Income Tax Regs.) encompassed an extended stay in a nursing home
notwithstanding the “possibility or probability” that death would
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preclude a return to the household. In Hein v. Commissioner,
supra, this Court had construed a “temporary absence due to
special circumstances” (as used in a predecessor of the head of
household regulations presently at section 1.2-2(c)(1), Income
Tax Regs.1) to include an extended confinement in a sanatorium
due to mental and physical illness, even though the prospects of
recovery and return to the household were minimal. The
Commissioner had contended in Hein that, given the claimed
household member's advanced age and poor recovery prospects, her
confinement was not a temporary absence because it was
unreasonable to assume that she would return, presumably relying
on the provision, now codified in section 1.2-2(c)(1), Income Tax
1
The predecessor regulation was at sec. 1.1-2(c) of the
regulations under the Internal Revenue Code of 1954 and earlier
at sec. 39.12-4(c) of Regulations 118 under the Internal Revenue
Code of 1939. The regulation has at all times contained the
following language:
The taxpayer and such other person [i.e., other
occupant of the taxpayer's household] will be
considered as occupying the household for such entire
taxable year notwithstanding temporary absences from
the household due to special circumstances. A
nonpermanent failure to occupy the common abode by
reason of illness, education, business, vacation,
military service, or a custody agreement under which a
child or stepchild is absent for less than six months
in the taxable year of the taxpayer, shall be
considered temporary absence due to special
circumstances. Such absence will not prevent the
taxpayer from being considered as maintaining a
household if (i) it is reasonable to assume that the
taxpayer or such other person will return to the
household * * * .
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Regs., which provides that an absence will be disregarded “if * *
* it is reasonable to assume that the taxpayer or * * * [other
household occupant] will return to the household”. This Court
refused to apply a reasonable assumption of return standard in
the case of a dependent who was absent due to an extended
illness, concluding instead that in these circumstances “the true
test is not whether the return may be prevented by an act of God,
but rather whether there are indications that a new permanent
habitation has been chosen.” Hein v. Commissioner, supra at 835.
The Commissioner subsequently acquiesced in Hein, 1958-2
C.B. 3, and then, in 1966, adopted it in a revenue ruling. In
Rev. Rul. 66-28, 1966-1 C.B. at 32, the Commissioner, relying on
Hein, ruled that “confinement” to a nursing home due to illness
would be considered a “temporary absence due to special
circumstances” for purposes of the dependency exemption
regulations (section 1.152-1(b), Income Tax Regs.),
notwithstanding the extended length of the absence or the
probability, given the dependent's age and condition, that return
would not occur:
In view of the decision in the Hein case, a period
of time during which a dependent is confined to a
nursing home because of illness will likewise be
considered a temporary absence due to special
circumstances for the purpose of section 152(a)(9) of
the Code, even though such absence is for an extended
period of time. There must, of course, be an absence of
an intent on the part of the taxpayer and the dependent
to change the dependent's principal place of abode.
The possibility or probability that death might
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intervene before the dependent returns to the
taxpayer's household is not sufficient to make such
absence permanent. [1966-1 C.B. at 32.]
The Commissioner in Rev. Rul. 66-28, supra, thus eschewed
reliance on any reasonable assumption of return standard in the
case of absences due to extended illness and instead emphasized
the absence of intent on the part of the taxpayer or dependent to
change the dependent's place of abode.
As the dissenting opinion points out, the “temporary absence
due to special circumstances” provisions in the head of household
regulations addressed in Hein contain the requirement that it be
“reasonable to assume that the [absent] taxpayer or * * * [absent
occupant of the taxpayer's household] will return to the
household”, whereas the “temporary absence due to special
circumstances” provisions in the dependency exemption regulations
construed in Rev. Rul. 66-28, supra, contain no such provision.
The dissenting opinion argues that this distinguishes Rev. Rul.
66-28, supra, from the instant case, which involves the head of
household regulations. I disagree. There is no indication in
Rev. Rul. 66-28, supra, that the Commissioner was seeking to
distinguish the rules applicable to temporary absences due to
illness in the case of the dependency exemption regulations
versus the head of household regulations. To the contrary, the
ruling characterizes the two regulations as “identical”, thereby
minimizing the significance of the reasonable assumption of
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return clause contained in one of them--at least in the case of
absences due to extended illness. I believe the fair reading of
Rev. Rul. 66-28, supra, is that the Commissioner decided, in the
case of absences due to extended illness, to apply the Hein test
of intent and give little or no weight to any reasonable
assumption of return, whether for purposes of the dependency
exemption regulations or the head of household regulations.
Rev. Rul. 66-28, supra, has stood unmodified for more than
40 years and is now recognized by Congress as part of the present
law defining eligibility for the dependency exemption, head of
household filing status, and the earned income credit (the rules
for which incorporate the head of household standards). For
example, the description of the present law concerning the
dependency exemption contained in H. Conf. Rept. 108-696, at 56
(2004), states:
A taxpayer or other individual does not fail to be
considered a member of a household because of
"temporary" absences due to special circumstances,
including absences due to illness, education, business,
vacation, and military service. * * * Indefinite
absences that last for more than the taxable year may
be considered "temporary". For example, the IRS has
ruled that an elderly woman who was indefinitely
confined to a nursing home was temporarily absent from
a taxpayer's household. Under the facts of the ruling,
the woman had been an occupant of the household before
being confined to a nursing home, the confinement had
extended for several years, and it was possible that
the woman would die before becoming well enough to
return to the taxpayer's household. There was no
intent on the part of the taxpayer or the woman to
change her principal place of abode. 42
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42
Rev. Rul. 66-28, supra, 1966-1 C.B. 31.
Consistent with the approach in Rev. Rul. 66-28, supra, the
report also treats the principles of the ruling as equally
applicable for dependency exemption, earned income credit, and
head of household purposes. Elsewhere in the same discussion of
present law, the report describes the residency test for the
earned income credit as follows:
The residency test is satisfied if the individual
has the same principal place of abode as the taxpayer
for more than one half of the taxable year. * * * As
under the dependency exemption (and head of household
filing status), temporary absences due to special
circumstances, including absences due to illness,
education, business, vacation, and military service are
not treated as absences for purposes of determining
whether the residency test is satisfied. * * * [H.
Conf. Rept. 108-696, supra at 58; emphasis added.]
That is, the test for temporary absence due to special
circumstance in the case of the earned income credit is the same
“as under the dependency exemption (and head of household filing
status)”; nowhere is it suggested that the test of temporary
absence for purposes of head of household filing status and the
earned income credit is more stringent than, or otherwise
different from, the test applied for purposes of the dependency
exemption. To the same effect, see S. Rept. 108-257, at 81
(2004); H. Rept. 108-126, at 181 (2003); Jt. Comm. on Taxation,
General Explanation of Tax Legislation Enacted in the 108th
Congress, at 120 n.199 (J. Comm. Print 2005).
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The Commissioner, then, has issued widely recognized public
guidance in which he equates the temporary absence provisions of
the dependency exemption and head of household regulations, and
indicates that at least in certain narrow circumstances little or
no weight will be given to the reasonable assumption of return
provision. Respondent's position in this case is far from clear.
The case was submitted without briefs, and the only argument
respondent advances to support his conclusion that petitioner
fails to satisfy the residency test is as follows:
Respondent's position is that sharing of the same
principal place of abode requires that a "qualifying
child" live with the taxpayer for more than one-half of
the taxable year. The test is a "simple residence
test" that bases eligibility on whether the taxpayer
lived with her child for more than six months of the
taxable year. Sherbo v. Commissioner, 255 F.3d 650,
654-55 (8th Cir. 2001).
Petitioner and her children could not have lived
together for more than half of the year because
petitioner was in state custody for more than half of
the 2002 taxable year.
Respondent does not even address the “temporary absence due to
special circumstances” provision of the head of household
regulations, let alone the reasonable assumption of return clause
therein or Rev. Rul. 66-28, supra. Thus, I do not know whether
respondent's position is that a parent's pretrial incarceration
does not constitute a “temporary absence due to special
circumstances” since it isn't among the listed circumstances in
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the regulation, or that petitioner's incarceration, though
concededly a special circumstance, is nonetheless disqualifying
because it was not reasonable to assume that petitioner would
return. What is known about the Commissioner's position is that
he has extended Rev. Rul. 66-28, supra, in Service Center Advice
to cover a child's pretrial and post-conviction incarceration.
In Service Center Advice 200002043 (Jan. 14, 2000), the
Commissioner advised whether a child's detention in a juvenile
facility for a potentially extended period would qualify as a
temporary absence due to special circumstances within the meaning
of section 1.2-2(c)(1), Income Tax Regs. (and, consequently, for
purposes of eligibility for the earned income credit). The
Advice concludes: “Detention in a juvenile facility pending
trial is a temporary absence * * * due to special circumstances
if there is no intent on the part of the taxpayer and child to
change the child's principal place of abode.” Explaining the
conclusion, the Advice states:
Detention in a juvenile facility pending trial can be a
temporary absence notwithstanding the possibility that
the child may be detained after the trial for an
extended period of time in a juvenile facility. As
indicated by the Hein case and Rev. Rul. 66-28, the
length of the person's absence from the household does
not, by itself, determine whether the absence is
temporary. What is determinative is whether there is
any intent to change the principal place of abode.
[Emphasis added.]
The Commissioner thus treated as virtually self-evident the
application of the principles of Hein and Rev. Rul. 66-28 to an
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incarceration scenario (albeit of a child rather than an adult).
The Commissioner's application of Rev. Rul. 66-28 to a juvenile
incarceration included the principle that it is the existence of
any intent to change the principal place of abode that is
“determinative” in this particular circumstance.2 While it is
recognized that informal guidance such as a Service Center Advice
does not bind the Commissioner as a revenue ruling does under
Rauenhorst v. Commissioner, 119 T.C. 157 (2002), such informal
guidance is relevant in determining the scope of the principles
in a revenue ruling. See id. at 173 n.12.
In these circumstances, absent a reasoned argument from
respondent that might distinguish Rev. Rul. 66-28, supra, I do
not believe respondent should be permitted to maintain the
position he has taken in this case. Under Rauenhorst, I believe
petitioner is entitled to rely on Rev. Rul. 66-28, wherein the
Commissioner attributed little or no weight to the reasonableness
of an assumption of return. The analogies between the facts of
this case and those of Rev. Rul. 66-28 are close. Absences due
to extended illness or pretrial incarceration share significant
similarities. Both absences are essentially involuntary.
Moreover, both create particular difficulties in applying the
2
Notably, the Commissioner also treated this
“determinative” aspect of Rev. Rul. 66-28, 1966-1 C.B. 31, as
applicable in interpreting sec. 1.2-2(c)(1), Income Tax Regs.,
without regard to the fact that Rev. Rul. 66-28, supra, construed
sec. 1.152-1(b), Income Tax Regs.
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reasonable assumption of return clause of the regulations. In
the case of extended illness, applying the reasonable assumption
of return standard requires the tax administrator to engage in a
medical prognosis that is difficult and perhaps unseemly. In the
case of pretrial incarceration, such application requires the tax
administrator to speculate about the outcome of the criminal
process in a manner that may be inconsistent with the presumption
of innocence.
Limiting this case narrowly to its circumstances involving
an unconvicted taxpayer who is incarcerated awaiting trial, I am
satisfied with the principal opinion's finding that petitioner
had not, as of the close of 2002, evidenced any intent to change
households. Accordingly, under the principles of Rev. Rul. 66-
28, supra, petitioner is entitled to treat her absence as
“temporary * * * due to special circumstances” within the meaning
of section 1.2-2(c)(1), Income Tax Regs.
THORNTON, J., agrees with this concurring opinion.
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GOEKE, J., concurring: I concur in the result reached by the
adopted opinion. I write separately to emphasize the very
limited nature of the holding reached today. That is, where a
taxpayer is involuntarily removed from her principal place of
abode and has not manifested any intent to change that abode, her
absence shall be considered temporary for purposes of eligibility
for the earned income credit. See Hein v. Commissioner, 28 T.C.
826, 835 (1957).
We do not adopt a general intent test that would be
inconsistent with the reasonableness of return test of section
1.2-2(c)(1) of the income tax regulations.1 In evaluating
whether an absence was temporary for purposes of head of
household status, this Court in Hein recognized that special
circumstances exist whereby a taxpayer (or dependent) never
intending to change homes has been involuntarily removed from the
home and confined to a separate location. Despite a regulation2
requiring an analysis of whether it was reasonable to assume the
dependent would return home, we held that the possibility of the
dependent’s absence becoming permanent, by the dependent’s
1
The legislative history to the earned income credit (EIC)
indicates Congress’s intent that we are to apply rules similar to
those applied in determining head of household status when
determining whether the residency requirements of the EIC have
been met. H. Conf. Rept. 101-694, at 1037 (1990), 1991-2 C.B.
560, 564.
2
The regulation at issue was the predecessor to sec. 1.2-
2(c)(1) at sec. 39.12-4(c) of Regulations 118 under the Internal
Revenue Code of 1939.
- 24 -
passing, before the dependent is able to return to the home
should not prevent eligibility for relief where there is no
evidence she intended to change homes. While not finding the
regulation invalid, we stated: “[W]e are unwilling to conclude
that it was the intention of the Congress that, where a child or
other dependent is sent to a hospital under circumstances that
make it likely he will die, this, in itself, is sufficient to
change the principal place of abode.” Id.The dissent’s criticisms apply equally to the result reached
by this Court in Hein. Yet in the many years since Hein was
decided, the Commissioner first acquiesced in our holding, 1958-2
C.B. 3, 6, and later adopted our holding in Rev. Rul. 66-28,
1966-1 C.B. 31. See also Serv. Ctr. Advice 200002043 (Jan. 14,
2000) (citing Hein in indicating that “detention in a juvenile
facility” pending trial is a temporary absence for purposes of
the earned income credit). In turn, Congress has cited the
Commissioner’s position in Rev. Rul. 66-28, supra, in several
statements of the present law with respect to residency
requirements. See H. Conf. Rept. 108-696, at 56 n.42 (2004); S.
Rept. 108-257, at 81 n.120 (2004); H. Conf. Rept. 108-126, at 179
n.327 (2003). Thus, whatever the merits of the criticism of
Hein may have been, the Commissioner and Congress now seemingly
agree with its result.
I believe Hein applies to the very limited facts before the
Court today. Where an accused is involuntarily detained in jail
- 25 -
pending her criminal trial, the absence is temporary for purposes
of determining eligibility for the earned income credit. I see
the petitioner’s absence in this case as analogous to a departure
caused by serious illness and not a circumstance in which it is
appropriate to apply the reasonableness of return test. It is
contrary to our criminal justice system to presume petitioner’s
guilt before her conviction. The possibility that her absence
would become permanent by virtue of her ultimate conviction
should not lessen the temporary nature of her detention and
absence in the months preceding her trial.
COHEN, LARO, and THORNTON, JJ., agree with this concurring
opinion.
- 26 -
HALPERN, J., dissenting:
I. Introduction
I do not agree with the analysis set forth in the principal
(first) opinion, authored by Judge Kroupa, or the concurring
opinions authored by Judges Gale and Goeke. The issue that
separates us is the standard for determining whether, on account
of petitioner’s arrest and detention on June 5, 2002, she was
temporarily absent from the household that, up until that date,
she had physically occupied with her two children. To determine
whether a taxpayer’s absence from a household is temporary,
section 1.2-2(c)(1), Income Tax Regs., imposes a reasonable-
expectation-of-return test. For different reasons, the authors
of the principal and concurring opinions abandon that test in
favor of a single factor inquiry as to whether there is a lack of
evidence of intent to change the place of abode.
Section 1.2-2(c)(1), Income Tax Regs., has the force and
effect of law unless it is unreasonable under the statute. See,
e.g., Chevron U.S.A., Inc. v. Natural Res. Def. Council, Inc.,
467 U.S. 837 (1984); Natl. Muffler Dealers Association, Inc. v.
United States, 440 U.S. 472 (1979). Neither the principal
opinion nor either of the concurring opinions makes a convincing
argument that the regulation is unreasonable under the statute.
Moreover, we do not have the benefit of the parties’ thoughts on
that or much of anything. We granted the parties’ motion for
- 27 -
leave to submit the case without a trial on the basis of the
pleadings, pretrial memoranda, and the stipulation of facts. We
have no briefs. The pretrial memoranda are uninformative of the
issues dividing the Court. The only relevant portion of
respondent’s memorandum is as follows:
Respondent’s position is that sharing of the same
principal place of abode requires that a “qualifying
child” live with the taxpayer for more than one-half of
the taxable year. The test is a “simple residence
test” that based eligibility on whether the taxpayer
lived with her child for more than six months of the
taxable year. Sherbo v. Commissioner, 255 F.3d 650,
654-655 (8th Cir. 2001).
Petitioner, who is pro se, fails to address the issues at all.
Before proceeding any further, I would ask the parties for
briefs. The Court not having done so, I set forth my
disagreements with the principal and concurring opinions.
II. Discussion
A. The Same Principal Place of Abode
The principal question before us is whether petitioner is
eligible for the earned income credit allowed by section 32. The
answer depends on whether petitioner and her two children had the
same “principal place of abode” for at least 6 months of 2002.
Sec. 32(c)(3)(A)(ii). Petitioner was arrested on June 5, 2002,
and held in the Lane County, Oregon, jail until April 26, 2003,
when she was convicted of murder and remanded to State custody to
serve a life sentence.
- 28 -
To determine whether petitioner and her children had the
same principal place of abode for at least 6 months during 2002,
we look to section 1.2-2(c)(1), Income Tax Regs. Pursuant to
that section, individuals have the same abode during periods that
they occupy the same household. As pertinent to our present
inquiry, we have interpreted the term “occupy” to mean
“physically occupy”. See Prendergast v. Commissioner, 57 T.C.
475, 479 (1972), affd. 483 F.2d 970 (9th Cir. 1973); Biolchin v.
Commissioner, T.C. Memo. 1969-197, affd. 433 F.2d 301 (7th Cir.
1970). Petitioner did not physically occupy the same household
as her children after June 5, 2002. She and her children,
therefore, did not physically occupy the same household for at
least 6 months during 2002. Nevertheless, section 1.2-2(c)(1),
Income Tax Regs., provides that, in determining whether an
individual occupies a household for an entire year, her absence
during some or all of that year will be excused if, among other
things, it is both temporary and due to special circumstances. I
agree with the principal opinion that we should apply a similar
exception in determining whether petitioner and her children co-
occupied the same household for more than 6 months during 2002
for purposes of the earned income credit.
B. Temporary Absence Due to Special Circumstances
Section 1.2-2(c), Income Tax Regs., provides that a
nonpermanent failure to occupy the common abode by reason of,
- 29 -
among other things, illness, education, business, vacation, or
military service shall be considered temporary absences due to
special circumstances. I agree with the principal opinion that
the list of special circumstances in section 1.2-2(c)(1), Income
Tax Regs., is not exclusive. See Prendergast v. Commissioner, 57
T.C. at 480. I have no quarrel with the conclusions in the
principal opinion that (1) “Jail confinement after an arrest is a
type of absence that is of a necessitous variety”, see principal
op. p. 8, and (2) “jail confinement is similar to those examples
listed in * * * [section 1.2-2(c)(1), Income Tax Regs.]”, see
principal op. pp. 8-9.
C. The Reasonable-Expectation-of-Return Test
At the end of 2002, there was insufficient information to
say with certainty whether petitioner’s absence from the
household on account of her arrest and incarceration was
temporary (and therefore an excusable special circumstance) or
permanent (and therefore inexcusable, whether a special
circumstance or not). The reasonable-expectation-of-return test
solves that dilemma. In pertinent part, section 1.2-2(c)(1),
Income Tax Regs., provides: “Such absence [i.e., an absence due
to a special circumstance] will not prevent the taxpayer from
being considered as maintaining a household if * * * it is
reasonable to assume that the taxpayer or such other person will
return to the household”.
- 30 -
Thus, where, at the time a determination of abode must be
made, it cannot be determined whether a person’s absence is
permanent, the absence will be ignored if it is reasonable to
assume that the person will return.1 For instance, assume that
petitioner had been arrested on strong evidence of child abuse.
At the time of her arrest, or at any time thereafter while the
household still existed and she remained in jail, no one could
say with certainty that her absence was permanent. Given the
strong evidence of child abuse, however, it would be reasonable
to assume that her absence would be permanent, no matter how the
charges against her were resolved. In contrast, it might be
unreasonable to make the same assumption if the only charge
against her were that she had stolen money that she had expended
on support for her children.2
D. Hein v. Commissioner
In Hein v. Commissioner, 28 T.C. 826 (1957), a Court-
reviewed opinion, we held that a lack of a showing of the intent
permanently to abide elsewhere is dispositive of the issue
1
And, in circumstances not here pertinent, the taxpayer
continues to maintain the household or a substantially equivalent
household in anticipation of her or her co-occupant’s return.
Sec. 1.2-2(c)(1), Income Tax Regs.
2
If it is reasonable to assume that a taxpayer absent from
her household on account of a special condition will return to
the household, then her death prior to her return (making her
absence permanent) would not seem to be a disabling factor
because of the language of sec. 1.2-2(c)(1), Income Tax Regs.,
dealing with death during the taxable year.
- 31 -
whether an absence is to be considered temporary or permanent.
We were interpreting language virtually identical to that in
section 1.2-2(c)(1), Income Tax Regs. The taxpayer in question
had claimed head of household status predicated on his
maintaining a common household with his invalid sister. The
sister was his dependent, and, although confinement was not
absolutely necessary (she could have been maintained elsewhere
with 24-hour nursing care), she had been confined for many years
to a sanatorium on account of mental illness and had little, if
any, chance of recovering. If she did recover, however, the
taxpayer intended that she would again live in his home. The
Commissioner’s principal argument was that, because of the
seriousness of the sister’s illness, it was unreasonable to
assume that she would return to the taxpayer’s household. We
answered: “[T]he true test is not whether the return may be
prevented by an act of God, but rather whether there are
indications that a new permanent habitation has been chosen.”
Hein v. Commissioner, supra at 835.
E. The Commissioner’s Pronouncements
In 1958, the Commissioner announced his acquiescence in
Hein. 1958-2 C.B. 3, 6. The boilerplate accompanying the
announcement states, among other things, that the Commissioner’s
acquiescence in an adverse decision can be relied on only with
respect to the application of the law to the facts in the
- 32 -
particular case, and that the acquiescence means acceptance of
the conclusion reached and does not necessarily mean acceptance
and approval of any or all of the reasons assigned by the Court
for its conclusions. Id. at 3.
In 1966, the Commissioner issued Rev. Rul. 66-28, 1966-1
C.B. 31, which concerns whether an individual qualified as the
taxpayer’s dependent under then section 152(a)(9). The ruling
addresses the question of whether the individual, who was
indefinitely confined to a nursing home because of an illness
requiring constant medical care, was to be considered temporarily
absent from her principal place of abode during such confinement.
The pertinent regulation, then and now, contains a provision
dealing with temporary absence due to special circumstances
similar to the temporary absence provision in section 1.2-
2(c)(1), Income Tax Regs. See section 1.152-1(b), Income Tax
Regs. The provisions are not identical, however, in that section
1.152-1(b), Income Tax Regs., unlike section 1.2-2(c)(1), Income
Tax Regs., does not include the reasonable-expectation-of-return
test.
Relying on the similarity of the two provisions and this
Court’s interpretation of the predecessor of section 1.2-2(c)(1),
Income Tax Regs., in Hein v. Commissioner, supra, the
Commissioner concluded that indefinite confinement to a nursing
home because of illness will likewise be considered a temporary
- 33 -
absence due to special circumstances for purposes of then section
152(a)(9) even though such absence is for an extended period of
time. The Commissioner added: “There must, of course, be an
absence of an intent on the part of the taxpayer and the
dependent to change the dependent's principal place of abode.
The possibility or probability that death might intervene before
the dependent returns to the taxpayer's household is not
sufficient to make such absence permanent.”
Finally, in Service Center Advice 200002043 (Jan. 14, 2000),
the Commissioner states the following with respect to section
1.2-2(c)(1), Income Tax Regs.:
Detention in a juvenile facility pending trial can
be a temporary absence notwithstanding the possibility
that the child may be detained after the trial for an
extended period of time in a juvenile facility. As
indicated by the Hein case and Rev. Rul. 66-28, the
length of the person's absence from the household does
not, by itself, determine whether the absence is
temporary. What is determinative is whether there is
any intent to change the principal place of abode.
[Emphasis added.]
For whatever it adds, the advisory does make the assumption that
the child is not being tried as an adult.
F. Validity of the Regulations
The three pronouncements could be read to indicate an
erosion of the Commissioner’s reliance on the reasonable-
expectation-of-return test. Nevertheless, none of them is
explicit in abandoning that test, and I am not prepared to
conclude that the Commissioner has, sub silentio, amended the
- 34 -
Secretary’s regulations. Moreover, the principal opinion appears
to uphold the regulations. It cites section 1.2-2(c)(1), Income
Tax Regs., and claims: “We * * * consider whether it is
reasonable to assume that petitioner, who was temporarily absent
from her home in 2002 due to her arrest and jail confinement but
before her conviction, would return to her home.” Principal op.
p. 9. It characterizes Hein v. Commissioner, 28 T.C. 826 (1957),
as having “previously established factors to rely on in making
this determination.” Id. It claims to “apply the factors we set
forth in Hein to the circumstances here and concludes that it was
reasonable to assume petitioner would return to her home with her
children.” Id. at 10. It declines, however, “to assess
objectively the strength of the criminal charges against
petitioner or require petitioner to show the weakness of the
charges against her to determine whether it was reasonable to
assume she would return to her home.” Id. Besides the pendency
of the criminal case against petitioner at the end of 2002, and
petitioner’s reference to her mother-in-law’s home as her “home”,
the only factor the principal opinion mentions is: “As in Hein,
there are no indications in the record that petitioner intended
to choose a new home.” Id. It concludes: “[A]lthough
petitioner has been arrested and was confined in jail through the
end of 2002, it was reasonable to assume she would return to her
- 35 -
home because she had not chosen a new home.” Id. at 11 (emphasis
added).
The reasonable-expectation-of-return test presents a
question of fact. Petitioner bears the burden of proving by a
preponderance of the evidence that it is reasonable to assume
that she will return to the household. See Rule 142(a). The
evidence in this case shows that, on June 5, 2002, petitioner was
removed from her household by reason of her arrest and did not
return. But for the finding in the principal opinion with
respect to her intent, petitioner has failed to produce any
evidence that it is reasonable to assume that she will return.3
The conclusion in the principal opinion that, as a matter of law,
petitioner’s showing of intent is sufficient both follows Hein v.
Commissioner, supra, and sidesteps the factual inquiry required
by the regulations. My difficulty with the principal opinion is
that it does not reconcile Hein with the reasonable-expectation-
of-return test. If the premise of the principal opinion is that
the reasonable-expectation-of-return test is invalid, the
principal opinion should say so and explain why. If the
principal opinion does not consider the test to be invalid, then
3
For the sake of argument, I am willing to concede that
petitioner has proven that she intended to return home, although
in this fully stipulated case that fact is not stipulated and the
author of the principal opinion makes the finding that petitioner
had not chosen a new home based in part on the absence of
“indications in the record that petitioner intended to choose a
new home.” Principal op. p. 10.
- 36 -
it should explain how it is consistent with Hein, which I read as
disregarding a multiple factor analysis in favor of establishing
the lack of evidence of intent to change the place of abode as
the sole deciding factor.
The Commissioner’s acquiescence in Hein, to say the least,
muddies the waters.
G. Rauenhorst v. Commissioner
In Rauenhorst v. Commissioner, 119 T.C. 157 (2002), we
refused “to allow * * * [IRS] counsel to argue the legal
principles of * * * opinions against the principles and public
guidance articulated in the Commissioner's currently outstanding
revenue rulings.” Id. at 170-171. The concurring opinions
would, explicitly, in the case of Judge Gale, and, implicitly, in
the case of Judge Goeke, invoke Rauenhorst to foreclose
respondent from disavowing his acquiescence in Hein v.
Commissioner, supra, and his ruling, Rev. Rul. 66-28, supra.
First, I must point out the respondent has disavowed
neither. This is a fully stipulated case, the parties did not
file briefs, there was no argument, and respondent’s position in
his trial memorandum disavowed nothing.
Second, because of the boilerplate accompanying his
acquiescence, respondent’s acquiescence in Hein is ambiguous as
to what, exactly, he is acquiescing, other than the conclusion
reached: The Commissioner’s acquiescence “does not necessarily
- 37 -
mean acceptance and approval of any or all of the reasons
assigned by the Court for its conclusions.” 1958-2 C.B. at 3.
Third, Rev. Rul. 66-28, supra, is distinguishable in that it
is interpreting a regulation, sec. 1.152-1(b), Income Tax Regs.,
that does not contain the reasonable-expectation-of-return test,
contained in section 1.2-2(c)(1), Income Tax Regs. See supra
note 3. Perhaps Rev. Rul. 66-28, supra, is best read as
acknowledging that nursing home stays are “temporary absences due
to special circumstances” if done with the intent or hope of one
day returning, rather than abrogating a different regulation’s
requirement that such a hope to return be reasonable. The ruling
is also distinguishable in that a nursing home stay, although it
may be necessitous, is not compelling in the same way that a stay
in jail is compelling.
Fourth, even if not distinguishable, Revenue Rulings do not
have the force of regulations. E.g., Estate of Kincaid v.
Commissioner, 85 T.C. 25 (1985). Indeed, the Supreme Court has
held: “[T]he Commissioner’s acquiescence in an erroneous
decision, published as a ruling, cannot in and of itself bar the
United States from collecting a tax otherwise lawfully due.”
Dixon v. United States, 381 U.S. 68, 73 (1965).
Finally, and most importantly, are we really prepared to
interpret a ruling that, it seems by stealth, overrules a
- 38 -
regulation without asking for the Commissioner’s position and
without deciding for ourselves whether the regulation is valid?
H. Policy Concerns
If we are to be influenced by sympathy for petitioner in
light of what we discern to be the policy behind section 32, we
should consider that, to the extent we have crafted a rule of
law, it may have unintended consequences for other taxpayers
deserving of our sympathy. It is stipulated: “At the time of
petitioner’s arrest, the father of petitioner’s two children,
Charles Rowe, moved into the Rowe family home with petitioner’s
two children.” I assume that, under the tie-breaking rule of
section 32(c)(1)(C)(ii)(I), awarding the credit to the parent
residing with the children for the longest period during the
year, petitioner, having been deemed by the principal opinion to
have resided with the children for the whole of 2002 (as opposed
to the father’s approximately 7 months), gets the credit.4 To
take another case, assume that a single parent living with her
mother and young children is, as was the dependent in Hein v.
Commissioner, 28 T.C. 826 (1957), institutionalized for illness
with no actual chance of return. Would the children remain the
qualifying children of the mother (to the exclusion of the
grandmother) under the tie-breaking rule of what is now section
4
The referenced tie-breaking rule is now at sec.
152(c)(4)(B)(i).
- 39 -
152(c)(4)(A)(i), entitling the mother (and not the grandmother)
to head of household status, the earned income credit, and
dependency exemptions on account of the children? See secs.
2(b)(1)(A)(i), 32(c)(1)(A)(i), 152(a)(1), respectively. What
policy would drive that result?
III. Conclusion
This case presents too many questions for disposition
without briefing by the parties. Therefore, I respectfully
dissent.
COLVIN, MARVEL, HAINES, WHERRY, and HOLMES, JJ., agree with
this dissenting opinion.