Does imprisonment constitute a temporary absence when applying the EIC residency rules?

• Author: Keller, Jr., Carl E.
• Position: Earned income credit

Should a person's imprisonment be considered a temporary absence from home for purposes of the residency requirement for the earned income credit (EIC)? The Tax Court recently held that a taxpayer's jail confinement after her arrest but before her conviction was a temporary absence that did not disqualify her eligibility for the EIC (Rowe, 128TC 13 (2007)).

Facts

At the beginning of 2002, Cynthia Rowe maintained a home in Eugene, Oregon, where she and her two children lived. Rowe and the children later moved in with Rowe's mother-in-law, where they lived together until Rowe's arrest on June 5, 2002. After Rowe's arrest, the children's father moved into his mother's home to care for the children, but Rowe continued to provide support for the children. In fact, Rowe supported her children with wages, unemployment benefits, food stamps, and welfare medical assistance until July 2, 2002, when the Oregon Children's Services Division began providing the children with financial and medical assistance. On April 26, 2003, Rowe was convicted of murder and began serving a life sentence at the Coffee Creek Correctional Facility in Wilsonville, Oregon. She was appealing her conviction when this case was submitted to the Tax Court.

Rowe filed a timely 2002 tax return claiming head-of-household status, her children as dependents, and the EIC. She reported on the Form 1040, Schedule EIC, Earned Income Credit, that she had lived with her children for more than six months but less than seven months; as a result, she eventually received $1,070 for the EIC. After Rowe received her refund, the IRS issued a deficiency notice and contested three claims on Rowe's tax return: the head-of-household status, the dependency exemptions, and the EIC. The IRS disallowance of the head-of-household status did not have any economic effect on the return, and the Service eventually conceded that Rowe was entitled to claim the children as dependents. Thus, the sole issue in the case involved Rowe's eligibility to claim the EIC, even though she did not physically share the same place of abode with her children for more than half of 2002.

EIC Residency Requirements

The general rules for the EIC are found in Sec. 32, but most of the specific requirements that must be fulfilled for a taxpayer to claim the EIC with qualifying children are listed in Secs. 32(c)(3) and 152(c). The Service conceded that Rowe had met the age, identification, support, and relationship tests to claim the...