The Dependency Exemption for Minor Children: When Following the Rules Pays Off
For the tax year that ended December 31, 2011, slightly fewer than 84 million dependency exemptions1 were claimed on returns for children living at home.2 Subject to phase-out rules,3 the child dependency exemption is a permissible deduction from taxable income4 and entitles the claiming parent to other child-related potential tax-savers, such as head of household filing status,5 childcare tax credit,6 earned income tax credit,7 exclusion for dependent care benefits,8 and child tax credit.9
The exemption amount is annually adjusted for inflation.10 For 2014 returns, the deduction amount was $3,950.11 As of November 2014, the 2015 inflation adjustment and exemption amount had not yet been published by the IRS. The exemption amount is phased out for high earners whose adjusted gross income exceeds applicable amounts,12 which likewise are annually adjusted for inflation.13 For 2014, the phase-out begins when adjusted gross income on a joint return exceeds $305,050,14 $254,200 on a return filed by an unmarried individual,15 and $152,525 on a married filing separately return.16 On a joint return, the personal exemptions completely phase out when 2014 adjusted gross income reaches $427,550.17
With so many taxpayers claiming a child exemption, one would think that Congress would make the tax code addressing the exemption as simple as possible. However, it is anything but simple. Moreover, when a state court18 order fails to follow the Internal Revenue Code, the complexity grows exponentially.
Like innocent spouse claims, disputes about which parent gets to deduct the dependency exemption for a qualifying child flows over from the family court into the Tax Court.19 Usually, the tax owed in these disputes is small because high earners lose their dependent exemptions due to the phase-out rules. Low earners derive a smaller tax benefit because of graduated tax rates. The Tax Court, motivated to stay out of the fray, has required strict adherence to the rules of §152(e) for the noncustodial parent to claim the exemption.
This article describes the characteristics of a child that would qualify for a dependency exemption under the I.R.C., explains the parents’ entitlement to claiming the exemption and the rules that must be followed for one parent to waive his or her rights, articulates the complexities that arise when a qualifying child’s parents file their federal tax returns separately, discusses the Tax Court’s treatment of state court order provisions relating to child dependency exemptions, and explores steps that can be taken to help maximize the possibility that the IRS will honor a parent’s entitlement or waiver of the right to claim a child as a dependent for federal tax purposes.
Qualifying Minor Children
Not every minor child qualifies to be claimed as a dependency exemption deduction on a federal tax return. The minor child must meet certain tests, namely:20
• Relationship Test — An eligible child may be a taxpayer’s child,21 grandchild, brother, sister, stepbrother, stepsister, or a descendent of any such relative.22
• Age Test — The child must be younger than the taxpayer,23 must not have attained age 19 at the close of the taxable24 year, or must be a student under age 24,25 or must be permanently and totally disabled.26 As stated above, however, a child over the age limits who meets other tests may be claimed as a qualifying relative dependent.27
• Support Test — The child must not have provided more than one-half of his or her own support for the calendar year. In other words, others must have provided at least one-half of the child’s support.28
• Household Test — The child must have had the same principal place of abode as the parents for more than one-half of the taxable year in which the dependency exemption is claimed.29
• Return Test — If married, the child must not have filed a joint return with his or her spouse (other than to claim a refund), for the taxable year in which the taxable year of the parents’ return begins.30
• Citizenship Test — Even if a child meets all prior tests, he or she may still not qualify as a dependent for tax purposes unless he or she has been a citizen or resident of the U.S. or a country contiguous to the U.S.31 at some time during the calendar year for which the exemption is claimed,32 except as to an adopted child who has the same principal place of abode as the U.S. citizen parents and is a member of the parents’ household.33
Entitlement to Claiming the Exemption
• Custodial Parents’ Rights: The Fall Back Rule — When a qualifying child’s parents file their federal tax returns separately, the IRS will implement a two-step process to determine which parent is entitled to claim the child’s dependency exemption. First, the parent with whom the child resided for the longest period of time during the taxable year34 (the custodial parent (CP))35 is entitled to claim the child. If the child spends an equal amount of time with both parents,36 the parent with the highest adjusted gross income for the year37 is entitled to claim the child. This is called the fall back rule. The parents or a court may preempt the fall back rule if, pursuant to agreement or court order, a parent waives his or her right to the dependency exemption for a qualifying child.
• Noncustodial Parents’ Rights — When noncohabiting parents file separate federal tax returns, generally, only the CP38 will be entitled to claim a qualifying child as a dependent.39 An exception to this rule exists under §152(e), which permits a noncustodial parent (NCP) to claim the exemption. For the exemption to apply, the child’s parents must 1) together have provided more than one-half of the child’s support during the calendar year,40 and either be divorced or legally separated under a decree of divorce of separate maintenance,41 be separated under a written separation agreement,42 or live apart at all times during the last six months of the calendar year43; and 2) together or separately have custody of the child for more than one-half of the calendar year.44
If the above conditions are satisfied, the NCP may claim the child as a dependent on his or her return without satisfying the previously discussed household test,45 provided that:
the custodial parent signs a written declaration (in such manner and form as the [s]ecretary may by regulations prescribe) that such custodial parent will not claim such child as a dependent for any taxable year beginning in such calendar year,46 and the noncustodial parent attaches such written declaration to the noncustodial parent’s return for the taxable year beginning in such calendar year.47
These two requirements — the written declaration and the NCP attaching the written declaration to his or her federal tax return — are paramount to the successful claiming of the exemption as will be discussed.
Written Declaration of the Exemption Waiver: Form 8332
The written declaration of a parent’s waiver of his or her right to claim a child dependency exemption may be made on Form 833248 or in a separate writing that conforms to the substance of Form 8332 and “is executed for the sole purpose of serving as a written declaration under this section. An acceptable Form 8332 or equivalent must be attached to the return of the NCP. A court order or decree or a separation agreement may not service as a written declaration.”49 But, a court order entered solely to require the CP to release the exemption to the NCP containing all of the Form 8332 required information, including the signature of the CP, should qualify. The IRS may also accept certain pages of a divorce decree that went into effect after 1984 and before 2009, if the decree unconditionally provides that the NCP may take the exemption for a child, the custodial parent signs the decree, and the decree otherwise conforms to the substance of Form 8332.50 Regardless of the above, it is much easier and wiser to use Form 8332 whenever possible. Nonetheless, obtaining a dedicated exemption release order signed by the CP will provide a failsafe document to have available, just in case Form 8332 is not forthcoming, although it is questionable whether a Florida circuit court judge could issue an order acceptable to the Tax Court since it would have to be conditioned on child support being current.
The present version of Form 8332, revised as of January 2010, contains three parts. Part I, Release of Claim to Exemption for Current Year, requires the following: name of noncustodial parent and his or her SSN, name of child, year for which the release is being made, signature and SSN of the custodial parent, and date signed. Part II of Form 8332, Release of Claim to Exemption for Future Years, requires the same information as Part I except that, instead of identifying the current year, the form includes a line to specify all of the years to which the release is to apply.51 P art III of Form 8332, Revocation of Release of Claim to Exemption for Future Years, provides a means for the NCP to revoke a waiver with respect to calendar years beginning with the first calendar year starting after the year of revocation.52 As with the waiver, the revoking spouse may use Form 8332 or a signed and dated written declaration that conforms to the substance of that form.53
To claim the exemption, the NCP must attach to his or her return a signed Form 8332 with Part I or II completed, or a conforming declaration.54 To revoke a waiver as to future years, the CP must attach a signed Form 8332 with Part III completed, or conforming declaration, to his or her return for the year in question.55 The CP revoking a waiver must also keep a copy of the revocation and evidence of delivery of the notice to the other parent, or of the reasonable efforts to provide actual notice.56
A declaration not meeting the requirements of the present regulations will be given no effect57 with the exception of declarations executed in a taxable year beginning on or before July 2, 2008, and meeting the requirements in effect at the time of its execution.58 Once properly executed and attached to the NCP’s return, the release of the named dependent cannot be vitiated by facts outside of the form.
Today, most returns are electronically filed with the IRS using its e-file system. Form 8332 is not processed by the IRS e-filing system and must be mailed separately to the IRS with Form 8453, U.S. Individual Income Tax Transmittal for an IRS E-file Return. The same is true for certain pages from a divorce decree that went into effect after 1984 and before 2009 if attached to a return in lieu of Form 8332.59
When Rules Are Not Followed
Although a state’s law,60 including Florida law,61 may grant a trial court authority to consider the dependency exemption in awarding child support and to award the exemption to a spouse who is current in his or her child support obligations, it is important to remember that it is the I.R.C. and not the state court judge that determines a parent’s entitlement to the dependency exemption deduction or other child-related tax benefits, such as head of household filing status.62 Thus, whatever conditions a state divorce court may enumerate in its order regarding the dependency exemption, the NCP’s right to claim the child will be determined by meeting the requirements of §152(e), which include the custodial parent’s providing a properly completed Form 8332 or conforming declaration that absolutely, without condition, waives entitlement to the named child as a qualified dependent for the year in question, and, by the NCP attaching the Form 8332, or substitute declaration, to his or her return.63 Thus, issues arise for parents when state court orders fall short of or exceed the I.R.C.
Complexities can arise when a state court order is missing information necessary for the IRS and Tax Court to determine which parent is entitled to a dependency exemption. Two common examples of this are a failure to identify the custodial parent and a failure to require a parent to take the necessary steps to waive his or her right to claim the child dependency exemption.
• Identifying the Custodial Parent — In 2008, F.S. Ch. 61 was revised to, among other things, eliminate the terms “custody” and “custodial parent.” The absence of these terms can cause disputes between the parents as to who the “custodial parent” is for child dependency exemption purposes. Confusion can also arise when parents are awarded equal time and no “custodial parent” or “majority timesharing” parent is clearly identified64 because establishing which parent had the child for the majority of sleep-over nights can be difficult.
• Failure to Require Parents to Waive the Dependency Exemption — Often, a state court order will simply state that one parent is entitled to claim a qualifying child as a dependent for federal tax purposes and not require that the other parent execute Form 8332. For example, in Shenk v. Commissioner, 140 T.C. 200 (2013), the state court’s “[j]udgment of [a]bsolute [d]ivorce,” provided, in part, as follows:
[I]n 2003, and in odd-numbered years thereafter, provided that she is employed and earning income, [the mother] shall be entitled to claim the parties’ two younger children, WS and LS, as dependency exemptions on her income tax returns; and, assuming he is current with his child support payments at of the end of the year, [the father] shall be entitled in 2003, and in odd-numbered years thereafter, to claim the parties’ oldest son, MS, as a dependency exemption on his income tax returns. In even-numbered years, the parties’ entitlement to the foregoing dependency exemptions shall be reversed, with plaintiff having two exemptions and defendant having one, again assuming that defendant is employed and earning income and plaintiff is current with his child support payments at the end of the year in question.65
In 2009, even though all conditions precedent had been met for the father to be entitled to claim two of the three children as dependents on his tax return, the mother claimed two, prompting the IRS to disallow the father’s claimed dependency exemptions and head of household filing status. The Tax Court denied the father’s attempt to delay the Tax Court proceedings to attempt to compel the mother to execute the required Form 8332 in state court and subsequently held for the IRS on all issues.66 The Shenk court exemplifies how an insufficient state court order can cause problems. Among other things, the order in question did not require the mother (who was the CP) to sign and deliver Form 8332 in odd-numbered years; it made the right to claim the dependency exemption contingent on facts the Tax Court will not delve into; and, inserted into its order, vexatious nontax factual issues — whether the custodial parent is employed and earning wages — that Congress had intended the post-1983 rules to avert. While the state court’s objective was laudable, the conditions imposed only bound the divorcing spouses inter se, and, had no effect on whether IRS or the court would allow the exemption for one spouse as opposed to the other, or allow it for neither spouse, for that matter. The court stated, “[i]f such questions had to be answered before one could determine the proper claimant of the dependency exemption deduction, then section 152(e) would fail of its purpose.”67
• Contingency Complexities: F.S. §61.30(11)(a)(8) — In or about 1983, Congress attempted to simplify the child dependency exemption provision of the I.R.C.68 One modification was to relieve the Tax Court of the need to determine vexatious nontax factual issues when determining a taxpayer’s entitlement to claim a child dependency exemption.69
Therefore, additional issues can arise when state law ignores the simplicity of the I.R.C. For example, F.S. §61.30 (11)(a)(8) permits a trial court, as part of a child support determination, to order the CP to waive his or her right to claim a qualifying child’s dependency exemption conditioned on the NCP being current in his or her child support obligation.70 This extra condition, although enforceable under Florida law and binding between the parties, is not binding on the Tax Court.
The dependency exemption waiver must be an unconditional release of the CP’s right to claim the child as a dependent for the year(s) covered by the declaration. A declaration is not an unconditional release if the NCP’s right to claim the child as dependent “requires the satisfaction of any condition, including the noncustodial parent’s meeting of an obligation such as the payment of support.”71 This is well exemplified72 in Armstrong v. Commissioner, 139 T.C. 468 (2012).73 The father and mother had divorced and their original arbitration award and, later, modified child support order (which the mother had signed), both granted the father the right to claim the dependency exemption deduction for one of their children so long as he was current on his child support obligation. The modified child support order was signed by the mother and obligated her to provide the father with an executed Form 8332 if the conditions had been met. The mother failed to provide the father with a Form 8332, so he attached a copy of the arbitration award to his tax return and, after the IRS disallowed his dependency exemption, submitted a copy of the modified child support order. Nevertheless, the Tax Court majority upheld the disallowance, reasoning that the modified child support order, although signed by the mother, was not an acceptable substitute to an executed Form 8332 because the order did not unconditionally declare that the mother would not claim the child as a dependent.
Even though the father, pursuant to the state court order, was entitled to claim the exemption, the Tax Court noted, “[t]he question here, however, is not what he was entitled to under the state court order but what he is entitled to under section 152(e).”74 In so holding, the court was mindful of the fact that state orders regarding custody and support are modifiable and the IRS cannot be expected to monitor compliance with such orders or separation agreements. The Eighth Circuit Court of Appeals affirmed75 the decision of the Tax Court, citing language from the Senate report to 1967 amendments to §152 that the IRS should not be made “an unwilling arbiter between contending parents.”76
When the Rules are Followed: Respecting State Court Orders
The Tax Court will allow the dependency exemption if a well-drafted state court order adheres to the I.R.C. For example, in George v. Commissioner, 139 T.C. 508 (2012),77 a Virginia state court ordered a mother of two children to sign Form 8332, releasing her claim to the dependency exemption for her daughter for the years 1996 through 2010 to the father (her former husband), who was required to remain current in his child support obligation as a precondition to obtaining the right to claim the child as a dependent. The mother signed the form, stating, “I agree not to claim an exemption” for the child, “under threat of being held in contempt.” The mother, nevertheless, timely filed her tax returns for the years 2007 and 2008, claiming both children as dependents.78 The father, likewise, filed, claiming the daughter pursuant to the court order and attached the signed Form 8332 to his returns. The IRS disallowed the mother’s dependency deductions for both years with respect to the daughter. The Tax Court upheld the IRS’s disallowing of the mother’s dependency exemption claim for the daughter, citing to the Form 8332, which was executed pursuant to state court order. The Tax Court observed that only in the event of unlawful pressure constituting duress (and not compulsion of court order) would the court vitiate a signed Form 8332.79 It went so far as to state that an erroneous state court order would not rise to the level of being improper or wrongful.80 Finally, the Tax Court held that its review of the correctness of a state court order would undermine the intended “certainty” and “clarity of section 152(e) and would add great difficulty to the administration of the dependency exemption.”81
Adhering to the Rules: Best Practices
Litigation over the dependency exemption, both in state court and Tax Court, can be averted in many cases with careful drafting of settlement agreements and court orders. Some possible ways to minimize later conflict may include:
• Clearly identifying the parent with whom the children spend a majority of their time in every parenting plan and state court custody order.
• Each parent should consider maintaining corroborating evidence of his or her time with the children and the children’s residence in the event the child’s residence is questioned in Tax Court. This could include a timesharing log, school addresses, photographs of time spent at the home, doctor records, health insurance applications, and driver’s license address.
• Having parents immediately execute Form 8332 upon executing a settlement agreement or before a final order is entered.
• If a parent is to release the dependency exemption as to more than one year, employing language along the lines of:
Parent A who has been designated as the CP, shall execute and deliver to Parent B a properly completed Form 8332 that unequivocally and without condition releases the dependency exemption for Child X to Parent B for the years 20xx through and including 20xx. The aforementioned form shall be delivered to Parent B no later than 10 days before the final hearing in this case.
• If the exemption is to be released annually, employing language along the lines of:
On or before January 31, 2015, Parent A shall execute and deliver to Parent B a properly completed Form 8332 that unequivocally and without condition releases the dependency exemption for Child X to Parent B for the year 2014 provided Parent B has been current in child support payments through December 31, 2014. Parent A shall similarly deliver such Form 8332, signed and completed in the same manner, on each successive January 31, provided Parent B’s child support obligations are current as of the preceding December 31.
• Including language addressing revocation of Form 8332, such as “Spouse A shall not revoke a previously delivered Form 8332 without a court order finding that Spouse B was in arrears of child support as of December 31, of any year subject to this agreement.”
• Consider including language regarding damages in the event a parent improperly claims a dependency exemption, including any attorneys’ fees, suit money, and costs at the state level and in Tax Court.
• Consider language discussing the effect of a breach regarding a dependency exemption on child support, such as “[a]n alleged breach by Parent A shall not impact Parent B’s court-ordered child support obligation, which shall continue regardless of the breach.”
An improved understanding of the tax code by family law practitioners and judiciary along with careful crafting of agreement and state court order language in better harmony with the I.R.C. should reduce the chances of family disputes spilling over into the tax forum to help promote Florida’s families’ financial stability.
1 This article focuses on the qualification of a minor child for the dependency exemption. It will not discuss the dependency exemption available for an adult child as a “qualifying relative” under 26 U.S.C. §152(d)(1)(2012). Also not discussed are qualified pre-1985 instruments described in 26 U.S.C. §152(e)(3)(B) because children covered by such instruments are now adults.
2 IRS, SOI Tax Stats — Individual Income Tax Returns Publication 1304 (Complete Report), Table A, Table 2.4 for year 2011.
3 26 U.S.C. §151(d)(3) (2012).
4 I.R.C. §151(a) (1986), as amended. All section references are to the I.R.C. unless otherwise stated.
5 26 U.S.C. §2(b)(1)(A)(i) (2012).
6 26 U.S.C. §21(b)(1)(A) (2012).
7 26 U.S.C. §32(c)(3)(A) (2012).
8 26 U.S.C. §105(b) (2012).
9 2 6 U.S.C. §24(c)(1). See IRS, Publication 596: Earned Income Credit (EIC) (Nov. 20, 2013), available at http://www.irs.gov/pub/irs-pdf/p596.pdf; see also IRS, FAQs for Divorced and Separated Parents, available at http://www.eitc.irs.gov/Tax-Preparer-Toolkit/faqs/divorced (for a discussion of the treatment of child-related tax credits and divorce [hereinafter IRS, FAQs for Divorced and Separated Parents ]. A parent who waives the dependency exemption also releases the child tax credit but retains the exclusion of dependent care benefits, childcare and earned income tax credits, and the ability to claim head of household filing status. Both parents may deduct qualified medical expenses with respect to the child, 26 U.S.C. §213 (d)(5) (2012), and exclude employer-paid medical expenses when the custodial parent has not signed a waiver. See Rev. Proc. 2008-2 C.B. 586.
10 26 U.S.C. §151(d)(4).
11 IR-2013-87 (10-31-13).
12 26 U.S.C. §151(d)(3).
13 26 U.S.C. §§151(d)(4), 68(b)(2).
14 26 U.S.C. §§68(b)(1)(A), 68(b)(2), 151(d)(4) .
15 26 U.S.C. §§68(b)(1)(A), 68(b)(1)(C), 68(b)(2), 151(d)(4).
16 26 U.S.C. §§68(b)(1)(A), 68(b)(1)(C), 68(b)(1)(D), 68(b)(2), 151(d)(4).
17 26 U.S.C. §§68(b)(1)(A), 68(b)(2), 151(d)(4).
18 Fla. Stat. §61.30(11)(a) (2014) provides, in part, that the court may adjust the total minimum child support award, or either or both parents’ share of the total minimum child support award, based on deviation factors that include: “8. The impact of the Internal Revenue Service Child & Dependent Care Tax Credit, Earned Income Tax Credit, and dependency exemption and waiver of that exemption. The court may order a parent to execute a waiver of the Internal Revenue Service dependency exemption if the paying parent is current in support payments.”
19 Unlike as provided in §6015(e)(4) and Tax Court Rule 325, there is no right of the other spouse to intervene in a Tax Court dispute about the dependency exemption of a child. But, when spouses both claim the exemption, the IRS usually disallows both dependency claims to protect itself from getting whipsawed. Both cases wind up in the Tax Court, and the cases may be consolidated under Tax Court Rule 141.
20 26 U.S.C. §152(a)(1).
21 26 U.S.C. §§152 (f)(1)(A)(ii), (f)(1)(B) (child includes an eligible foster child and adopted child).
22 26 U.S.C. §§152(c)(2)(A), (B).
23 26 U.S.C. §152(c)(3)(A).
24 26 U.S.C. §152(c)(3)(A)(i).
25 26 U.S.C. §§152(c)(3)(A)(2), (f)(2). A student generally means an individual enrolled full time at an educational organization for at least five calendar months during the taxable year.
26 26 U.S.C. §152 (c)(3)(B).
27 See 26 U.S.C. §152(d). This article does not address the exemption deduction for children as qualifying relatives. Such children are not minors subject to the state court’s custody jurisdiction or orders with respect to the dependency exemption deduction or waiver thereof. Form 8332 is inapplicable to adult children who are dependents by virtue of being qualifying relatives. The Form 8332 instructions state, “If you are the custodial parent, you can use this form” to release or revoke a release to a claim of exemption for a child. An adult child may live with a parent, but the parent, in that case, does not have custody of the child; see also 26 C.F.R. §1.152-4(d)(1) (2014) (“A child is treated as residing with neither parent if the child is emancipated under state law.”).
28 26 U.S.C. §152(c)(1)(D).
29 26 U.S.C. §152(c)(1)(B).
30 26 U.S.C. §152(c)(1)(E). Section 152(b)(2) read literally contradicts the above by absolutely prohibiting the filing of a joint return without regard to the reason. But, both the IRS and the Tax Court have ruled that a tax return filed solely to receive a refund is not considered to be a joint return under §6013 when the dependent would not otherwise be required to file; rather, such return is treated as a claim for refund. See Rev. Rul. 65-34, 1965-1 C.B. 86, affirming Rev. Rul. 54-567, C.B. 1954-2, 108. Martino v. Commissioner, 71 T.C. 456 (1978).
31 26 U.S.C. §152(b)(3)(A).
32 26 C.F.R. §1.152-2(a)(1).
33 26 U.S.C. §§152(b)(3)(B), (c)(1)(E). Becoming a citizen after December 31 of the calendar year, but before filing of the return claiming the child, has been held not to qualify the child; see Leah Carlebach and Uriel Fried v Comm’r., 139 T.C. 1 (2012) (upholding the constitutionality of regulation).
34 26 U.S.C. §152(c)(4)(B)(i).
35 The author recognizes that Florida family law, F.S. Ch. 61, no longer employs the terms “custody” or “custodial parent”; however, such terms will be used in this article as they continue to exist in the I.R.C. and are used by the IRS.
36 For example, married spouses who live together, but file their tax returns separately, would spend the same number of nights with a qualifying child.
37 26 U.S.C. §152(c)(4)(B)(ii).
38 26 U.S.C. §152(e)(4)(A); 26 C.F.R. §1.152-4(d) (1a) and instructions to Form 8332.
39 26 U.S.C. §152(e)(4)(A).
40 26 U.S.C. §152(e)(1)(A).
41 26 U.S.C. §152(e)(1)(A)(i). Note that Florida law does not provide for a legal separation.
42 26 U.S.C. §152(e)(1)(A)(ii).
43 26 U.S.C. §152(e)(1)(A)(iii).
44 26 U.S.C. §152(e)(1)(B).
45 See 26 U.S.C. §§152(c)(3)(A), (c)(1)(D).
46 26 U.S.C. §152(e)(2)(A).
47 26 U.S.C. §152(e)(2)(B).
48 IRS, Form 8332: Release/Revocation of Release of Claim to Exemption for Child by Custodial Parent (Jan. 2010), available at http://www.irs.gov/pub/irs-pdf/f8332.pdf.
49 Id.
50 See IRS, FAQs for Divorce and Separated Parents.
51 26 C.F.R. §1.152 (e)(1)(A)(ii). A release that specifies all future years will be treated as specifying the first taxable year after the year of execution and all subsequent years.
52 26 C.F.R. §1.152-4(e)(3)(i).
53 26 C.F.R. §1.152-4(e)(3)(ii).
54 26 C.F.R. §1.152-4(e)(2).
55 26 C.F.R. §1.152(e)(3)(iii).
56 Id.
57 26 C.F.R. §1.152 (e)(4).
58 26 C.F.R. §1.152-4(e)(5).
59 See IRS, Form 8453: U.S. Individual Income Tax Transmittal for an IRS E-File Return (2013), and instructions thereto, available at http://www.irs.gov/pub/irs-pdf/f8453.pdf.
60 See Clarke v. Clarke, 823 N.W.2d 318 (Mich. App. 2012) (a case that illustrates a state court judge’s confusion regarding this point).
61 Fla. Stat. §61.30(11)(a).
62 See Shenk v. Comm’r, 140 T.C. 200 (2013).
63 26 U.S.C. §152(e).
64 See Harris v. Comm’r.,mT.C. Memo 2014-69 (Apr. 16, 2014) (an example involving unmarried parents), available at http://www.ustaxcourt.gov/InOpHistoric/harrismemo.wherry.TCM.WPD.pdf.
65 Shenk, 140 T.C. at 202.
66 Part of the reason the Tax Court ruled in favor of the IRS was because the statute of limitations had run on the mother’s tax return. This is generally a three-year statute. In this case, the tax return in question was filed in 2009 and the statute of limitations lapsed on April 15, 2013.
67 Shenk, 140 T.C. at 207.
68 H.R. Rept. No. 98-432 (Part 2) at 1498-1499 (1984), 1984 U.S.C.C.A.N. 697, 1140. The House Report to the Deficit Reduction Act of 1984 stated, “The present rules governing the allocations of the dependency exemption are often subjective and present difficult problems of proof and substantiation…. The committee wishes to give more certainty by allowing the custodial spouse the exemption unless that spouse waives his or her right to claim the exemption. Thus, dependency disputes between parents will be resolved without the involvement of the Internal Revenue Service.”
69 Shenk, 140 T.C. at 207.
70 Additional conflict can arise when amounts in addition to the child support guidelines computed amount, such as health insurance premiums, educational expenses, or extracurricular expenses have not been paid or have not been timely paid.
71 26 C.F.R. §1.152-4(e)(1)(i).
72 26 C.F.R. §1.152-4(e)(1)(ii). The state court order would also fail to qualify as a substitute for Form 8332 today because starting after July 2, 2008, written declarations other than Form 8332 must conform to the substance of that form and must be a document executed for the sole purpose of serving as a written declaration in lieu of the prescribed Form 8332.
73 Armstrong v. Comm’r, 139 T.C. 468 (2012), available at http://ustaxcourt.gov/InOpHistoric/Armstrong2.TC.WPD.pdf.
74 Id.
75 Armstrong v. Comm’r., 745 F.3d 890 (8th Cir. 2014).
76 Id. at 892 (citing S. Rep. No. 90-488, reprinted in 1967 U.S.C.C.A.N. 1527, 1528 (1967)).
77 George v. Comm’r., 139 T.C. 508 (2012), available at http://www.ustaxcourt.gov/InOpHistoric/george.TC.WPD.pdf.
78 The right to revoke was included in 26 C.F.R. §1.152-4 (e)(3) for taxable years beginning after July 2, 2008, and, thus, revocation was unavailable to Ms. George for the years 2007 or 2008.
79 George, 139 T.C. at 515.
80 Id. The Tax Court observed that its jurisdiction is defined by statute and does not encompass the power to correct a state court error regarding state law.
81 Id. at 517.
Robert S. Steinberg is admitted to the bars of New York (1972), Florida (1975), the U.S. Tax Court, and other federal courts. He is a licensed CPA in New York and Florida, practices as an attorney, and limits his practice to taxation.
This column is submitted on behalf of the Family Law Section, Norberto Sergio Katz, chair, and Sarah Kay, editor.
