The Tax Court in Brief
Freeman Law’s “The Tax Court in Brief” covers substantive Tax Court opinion, providing a brief of its decisions in clear, concise prose.
For a link to our podcast covering the Tax Court in Brief, download here or check out other episodes of The Freeman Law Project.
Graham v. Commissioner, T.C. Memo. 2025-116 | November 13, 2025 | Kerrigan, J. | Dkt. No. 4044-24
Short Summary: Taxpayers, husband and wife, claimed an earned income tax credit (“EITC”) for taxpayer wife’s sister on their federal tax return for tax year 2022. The IRS determined a deficiency for tax year 2022. Taxpayers asserted that the taxpayer’s wife’s sister lived with them for six months in tax year 2022 and was permanently and totally disabled. Taxpayer wife’s sister was 64 years old and did not file a joint tax return in tax year 2022.
Key Issue: Whether taxpayers were entitled to an earned income tax credit (“EITC”).
Primary Holdings: The Tax Court found that taxpayer husband’s testimony, in the absence of documentation to support the taxpayers’ assertions that the taxpayer wife’s sister lived with taxpayers for more than six months in tax year 2022 and was permanently and totally disabled, was “not enough to show that [taxpayers] met the statutory requirements.” Therefore, the Tax Court held that taxpayers did not meet their burden of proof and were not eligible to claim an EITC for taxpayer wife’s sister.
Key Points of Law:
Taxpayer’s Burden
- Generally, the Commissioner’s determinations set forth in a Notice of Deficiency are presumed correct, and taxpayers bear the burden of showing the determinations are erroneous. Tax Court Rule 142(a); Welch v. Helvering, 290 U.S. 111, 115 (1933).
- Deductions are a matter of legislative grace, and a taxpayer must prove his or her entitlement to a deduction or credit. INDOPCO, Inc. v. Commissioner, 503 U.S. 79, 84 (1992); New Colonial Ice Co. v. Helvering, 292 U.S. 435, 440 (1934).
Earned Income Tax Credit
- Section 32(a)(1) permits an eligible individual an earned income credit against that individual’s income tax liability.
- The amount of the credit varies depending on whether the taxpayer has one qualifying child, two qualifying children, three or more qualifying children, or no qualifying children. I.R.C. § 32(b).
- A “qualifying child” means a qualifying child of the taxpayer as defined in section 152(c). I.R.C. § 32(c)(3)(A). To be considered a qualifying child an individual must (1) bear a relationship to the taxpayer as described in section 152(c)(2); (2) have the same principal place of abode as the taxpayer for more than one-half of the taxable year; (3) meet the age requirements described in section 152(c)(3); and (4) not have filed a joint return with the individual’s spouse for the taxable year. I.R.C. §§ 32(c)(3)(A), 152(c)(1).
EITC Age Requirement
- Generally, an individual meets the age requirement if he or she has not reached the age of 19 at the close of the calendar year or is a student and has not reached the age of 24. I.R.C. § 152(c)(3)(A).
- If an individual meets the definition of permanently and totally disabled, he or she will be treated as meeting the age requirements. I.R.C. § 152(c)(3)(B). An individual is permanently and totally disabled if “unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than 12 months.” I.R.C. § 22(e)(3).
Insights: It is best practice to maintain records in support of all deductions claimed in the event it is necessary to substantiate such claims. While testimony of such entitlement is helpful to support such claims, the Tax Court is unlikely to find that testimony alone is enough to meet the burden of proof.
