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You can't claim the 'Hope Credit' just because you hope you qualify for it.

September 21, 2010

A Philadelphia man didn't have a great explanation for claiming a $1,500 "Hope Credit," which is available for certain post-high school education expenses. Still, he had to say something to the Tax Court. It went badly:

Petitioner claimed a $1,500 education credit (Hope Credit) for 2002; respondent disallowed it and included the disallowed amount in the underpayment to which the negligence penalty applies. Petitioner conceded the disallowance. Petitioner testified that he did not have any idea what an education credit was at the time he filed his 2002 tax return. He testified that he had not gone to school in 2002 and had "not been in school since 1978", when he received a bachelor's degree from Cheney University. His only explanation for the claiming of the credit was that this was some accountant's manipulation of the tax code. He did not discuss the education credit with Chester. Petitioner's claim of a $1,500 education credit on his 2002 tax return is evidence of negligence.

The "Chester" in this case is not Iowa's own governor, but Chester Muhammad, a now-dead tax practitioner whose clients have received a good deal of unpleasant attention from the IRS. Like the other clients, this one also had a bunch of imaginary charitable deductions on his 1040. Also like the other clients, his negligence penalties were upheld by the Tax Court.

The Moral: Hope can be a wonderful thing, but it isn't much of a tax return position.

Cite: Saunders, T.C. Summ. Op. 2010-138

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