Tax Court rejects EITC claim for sister-in-law due to missing age and residency proof
Graham v. Commissioner, T.C. Memo. 2025-116, No. 4044-24., 2025 BL 406408, Court Opinion
The court denied the couple’s earned income tax credit claim because they did not prove that the sister-in-law met the age or disability rules or lived with them long enough to qualify as a dependent.
Holding
The Tax Court held that the taxpayers failed to show their sister-in-law met the residency and age requirements to qualify as a “qualifying child” for purposes of the earned income tax credit.
Why It Matters
The EITC requires strict proof that a claimed individual meets the dependency tests.
Adults over the statutory age limit qualify only if they meet the definition of permanent and total disability.
Unsupported testimony is not sufficient to establish residency or disability.
Missing documentation can independently defeat an EITC claim even when the taxpayer’s narrative is credible.
Timeline
2022: Taxpayers claimed the earned income credit for the wife’s 64-year-old sister.
2023: IRS issued a notice determining a $3,686 deficiency.
March 2024: Taxpayers filed a timely petition in the Tax Court.
November 13, 2025: The Tax Court issued its memorandum opinion.
Judgment: Decision entered for the IRS.
Key Facts
Married couple filed jointly for 2022.
They claimed the EITC for Angela Davis, the wife’s sister.
Ms. Davis was 64 and did not file a joint return.
Taxpayers asserted she lived with them for more than six months.
They also asserted she was disabled following a stroke and used a wheelchair.
No documentation supported residency or disability.
Statutory or Regulatory Framework
The earned income credit under §32 is available only to eligible individuals.
A “qualifying child” must satisfy all elements of §152(c): relationship, residency for more than half the year, age requirements, and no joint return.
Adults over the age thresholds qualify only if they are permanently and totally disabled as defined in §22(e)(3).
Arguments
Petitioners argued:
The sister met the residency requirement because she lived with them for more than six months.
She was permanently and totally disabled due to a stroke and was unable to care for herself.
IRS argued:
The sister did not meet the age requirements.
Taxpayers did not provide evidence showing disability under §22(e)(3).
Taxpayers did not provide documentary proof of residency.
Court’s Reasoning
The taxpayers bear the burden of proof under Rule 142(a).
A qualifying child must meet all statutory tests under §152(c).
The sister’s age (64) meant she could qualify only under the disability rule.
Testimony alone did not establish permanent and total disability without medical evidence.
Testimony also did not establish that she lived with the taxpayers for more than half the year without corroborating documents.
Because the taxpayers failed to prove both residency and disability, the EITC claim could not stand.
Forward-Looking Implications
Taxpayers claiming EITC based on an adult relative must maintain medical and residency documentation.
Practitioners should verify early that all dependency tests can be proven with records before filing.
Unsupported statements regarding disability will not meet the statutory standard.
IRS enforcement of EITC claims will continue to rely heavily on documentary evidence.
Result
The Tax Court ruled in favor of the IRS and disallowed the earned income credit.
The Takeaway
Adults can qualify as “children” for EITC purposes only in narrow circumstances, and the burden to prove disability or residency is strict. Without records, even credible testimony will not carry an EITC claim.
Citations
§32: Defines eligibility for the earned income credit.
§152(c): Sets the dependency rules for qualifying children.
§22(e)(3): Defines permanent and total disability.
Welch v. Helvering: Establishes that the taxpayer bears the burden of proof.