Keeler v. Comm'r of Internal Revenue

• Decision Date: 22 May 1978
• Docket Number: Docket No. 5544-76.
• Citation: 70 T.C. 279
• Parties: SHIRLEY W. KEELER, PETITIONER v. COMMISSIONER of INTERNAL REVENUE, RESPONDENT
• Court: U.S. Tax Court

70 T.C. 279

SHIRLEY W. KEELER, PETITIONER

v.COMMISSIONER of INTERNAL REVENUE, RESPONDENT

Docket No. 5544-76.

United States Tax Court

Filed May 22, 1978.

Petitioner sought child care deductions under sec. 214 for expenses which enabled her to be gainfully employed. Children lived with her but she was not entitled to claim them as dependents because of her former husband's payments under divorce decree. Held, the children are not “qualifying individuals” within the meaning of sec. 214(b)(1) thereby precluding the deduction of any child care expenses under sec. 214. Held, further, the establishment of a class of individuals entitled to the child care deduction under sec. 214, as amended and in effect in 1973, and limiting such class to individuals who are entitled to the dependency exemption for the child, is not an unconstitutional classification in violation of the due process clause of the Fifth Amendment to the Constitution. Black v. Commissioner, 69 T.C. 505 (1977), and Nammack v. Commissioner, 56 T.C. 1379 (1971), affd. per curiam459 F.2d 1045 (2d Cir. 1972), followed. Shirley W. Keeler, pro se.

Gary C. Gough, for the respondent.

FORRESTER, Judge:

Respondent has determined a deficiency in petitioner's Federal income tax for the taxable year 1973 in the amount of $753.35. The following issues remain for our decision: (1) Whether petitioner is entitled to a deduction for child care expenses under section 214,¹ and (2) whether petitioner is entitled to a deduction for social security taxes paid attributable to such expenses.

FINDINGS OF FACT

All of the facts have been stipulated and are so found. Those necessary to an understanding of the case are as follows.

Petitioner Shirley W. Keeler (petitioner) resided in Overland Park, Kans., at the time the petition was filed herein. Petitioner filed her 1973 Federal income tax return with the Internal Revenue Service Center, Austin, Tex.

The petitioner and her former husband, William R. Keeler (William), were divorced on August 11, 1970. The divorce decree granted custody of their children, Ann, Bradford, and William, to petitioner. Each of the children throughout the taxable year 1973 were under 15 years of age. During the year at issue, petitioner maintained a household which was the principal place of abode for her children and furnished over one-half of the cost of maintaining such household.

William was ordered, pursuant to a settlement agreement incorporated in the divorce decree, to pay petitioner child support in the amount of $250 per month for each child. He paid petitioner total child support payments of $8,250 during 1973. The settlement agreement also stated the following:

Wife agrees that the sums of money agreed to be paid hereunder by Husband constitute the amount necessary for the support, maintenance and education of said children, and that Husband has the sole right to claim said minor children as dependents and as exemptions on his tax return.

Petitioner did not claim any of her three minor children as dependents or exemptions on her 1973 Federal income tax return.

Petitioner was gainfully employed on a full-time basis from February 15, 1973, to December 31, 1973. During this period, petitioner incurred and paid dependent care expenses to Charlotte J. Lynough in the form of wages. Petitioner also paid social security taxes of $175.50 on these wages.

On her 1973 return petitioner claimed a dependent care deduction in the amount of $3,000 for the expenses that she incurred in providing supervision and care for her three children. A tax expense deduction in the amount of $145 was also claimed by petitioner relating to the social security taxes paid.² Respondent disallowed petitioner's claimed dependent care deduction and the related tax expense deduction.

OPINION

Respondent argues that the child care expenses which petitioner incurred during the taxable year at issue fail to meet the requirements of section 214. ³ Such section provides that a taxpayer, who maintains a household which includes as a member one or more qualifying individuals, shall be entitled to a deduction for household and dependent care expenses incurred to enable the taxpayer to be gainfully employed.⁴

A qualifying individual, for purposes of section 214 means, inter alia, a dependent of the taxpayer under 15 with respect to whom the taxpayer is entitled to a personal exemption under section 151(e). An exemption deduction is allowed the taxpayer for each dependent (as defined in section 152) who is a child of such taxpayer and has not attained the age of 19.

Section 152 generally defines the term dependent to include a son or daughter over half of whose support was received from the taxpayer during the taxable year. However, section 152 (e)(2) enumerates the requirements that determine which divorced parent is entitled to the dependency exemption. The controlling section in this case is section 152(e)(2)(A). Such section states:

(2) SPECIAL RULE. —-The child of (divorced) parents * * * shall be treated as having received over half of his support during the calendar year from the parent not having custody if—-

(A)(i) the decree of divorce * * * between the parents applicable to the taxable year beginning in such calendar year, provides that the parent not having custody shall be entitled to any (personal exemption) for such child, and

(ii) such parent not having custody provides at least $600 for the support of such child during the calendar year * * *

If the noncustodial parent meets the two conditions of section 152(e)(2)(A), notwithstanding the amount of the contribution by the custodial parent, then the noncustodial parent is entitled to the dependency exemption for the child or children.⁵

Petitioner has the burden of proving that she is entitled to a child care deduction for 1973. Rule 142(a), Tax Court Rules of Practice and Procedure. In the case at hand the parties stipulated that William is entitled to the dependency exemption for each of the three minor children pursuant to the divorce decree and that he provided total child support of $8,250 ($2,750 for each child) during the calendar year at issue. The children therefore were not dependents of petitioner in 1973, but were dependents of her former husband. Since the children are not dependents of petitioner, they are not “qualifying individuals” as defined in section 214(b)(1). Therefore, we are compelled to conclude that petitioner has not met a specific requirement of section 214 and does not qualify for the child care expense deduction thereunder. The amount incurred in providing dependent care to petitioner's three minor children is a nondeductible personal expenditure pursuant to section 262.⁶

Petitioner contends that section 214 creates an unconstitutional classification by permitting the child care deduction to a class of individuals entitled to the dependency exemption while excluding from that class those individuals responsible for the physical, as opposed to the financial, care of the child if they are not entitled to claim the dependency exemption. She then continues to argue that all persons similarly situated in regard to the purposes of the legislation are not treated similarly. This, petitioner states, is a violation of the Fifth Amendment to the Constitution requiring the Federal Government to provide the same level of equal protection in its legislative enactments as required of State governments through the 14th Amendment. See, e.g., Johnson v. Robinson, 415 U.S. 361, 364 n. 4 (1974).

This is not the first time that the constitutionality of section 214 has been called into question. We examined exhaustively into the constitutionality of section 214(b) in Nammack v. Commissioner, 56 T.C. 1379 (1971), affd. per curiam 459 F.2d 1045 (2d Cir. 1972), and upheld it. In that case the taxpayer argued that section 214(b) unconstitutionally limited both the adjusted gross income and the amount deductible. In the recent case of Black v. Commissioner, 69 T.C. 505 (1977), we followed our decision in Nammack v. Commissioner, supra, and held that section 214 does not constitute unconstitutional discrimination on the basis of marital status, sex, or interference with family relationships. These two cases tested section 214 against the “rational basis” standard as formulated by the Supreme Court. ⁷

This, as petitioner concedes, is the applicable standard to apply in the instant case. In addition, a heavy burden is placed upon petitioner in challenging the constitutionality of a revenue measure, as stated by the Supreme Court in Nicol v. Ames, 173 U.S. 509, 514-515 (1899):

It is always an exceedingly grave and delicate duty to decide upon the constitutionality of an act of the congress of the United States. The presumption, as has frequently been said, is in favor of the validity of the act; and it is only when the question is free from any reasonable doubt that the court should hold an act of the lawmaking power of the nation to be in violation of that fundamental instrument upon which all the powers of the government rest. This is particularly true of a revenue act of congress. * * *

See also Penn Mutual Indemnity Co. v. Commissioner, 277 F.2d 16 (3d Cir. 1960), affg. 32 T.C. 653 (1959).

Petitioner argues that the result in the instant case should be the same as that reached in Moritz v. Commissioner, 469 F.2d 466 (10th Cir. 1972), revg. 55 T.C. 113 (1970), cert. denied. We do not agree. Moritz dealt with the case of denying the dependent care deduction to an unmarried male who supported his invalid mother. The Court of Appeals for the Tenth Circuit held that the classification allowing the deduction to women, widowers, divorcees, and husbands under certain circumstances amounted to invidious discrimination based solely on sex.⁸ The Tenth Circuit stated ( 469 F.2d at 470):

We conclude that the classification is an invidious discrimination and invalid under due process principles. It is not one...