A Primer on Exemptions for Dependents
In a recent Tax Court case, White v. Commissioner, the court summarized IRS requirements for claiming dependents. The taxpayer was divorced with two children. The children lived with the mother. The taxpayer paid his child support, paid for health insurance for the children and also made gifts to them. Because of these financial contributions, the taxpayer claimed exemptions for the two children.
The Tax Court summarized the law on exemptions:
Generally, a taxpayer is entitled to claim as a deduction an exemption amount for each of his or her dependents. The definition of a dependent includes a qualifying child or a qualifying relative. Pertinent here, a qualifying child is an individual who is a child of the taxpayer, shares the same principal place of abode as the taxpayer, has not attained the age of 19 or is a student and has not reached age 24 at the close of the calendar year, and has not provided over one-half of his own support.
(citations omitted). And what is a "qualifying relative?"
Turning to the definition of a qualifying relative, the individual must: (1) Bear a relationship to the taxpayer that is defined in section 152(d)(2); (2) have income less than the exemption amount; (3) have the taxpayer provide more than one-half of the individual's support for the year; and (4) not be a qualifying child of the taxpayer or any other taxpayer for the year.
See Section 152. Finally, the Court mentioned a special rule for children of divorced parents:
[A] noncustodial parent may treat a child as a qualifying child, notwithstanding the failure to satisfy the place of abode test of section 152(c)(1)(B), if the parents provided over one-half of the child's support, the parents are divorced, and the parents lived apart at all times during the last 6 months of the year. Section 152(e)(2) adds a requirement that "the noncustodial parent attaches to his/her income tax return for the year of the exemption a written declaration from the custodial parent stating that he/she will not claim the child as a dependent for the taxable year beginning in such calendar year."
. . . The declaration must be made either on a completed Form 8332 or on a statement conforming to the substance of Form 8332.
Form 8332 requires a taxpayer to furnish: (1) The name of the child, (2) the specific years of release, (3) the signature of the custodial parent confirming his or her consent, (4) the Social Security number of the custodial parent, (5) the date of the custodial parent's signature, and (6) the name and the Social Security number of the noncustodial parent claiming the exemption.
(citations omitted).
Unfortunately for the taxpayer, he met none of the requirements to claim dependency exemptions for his children.
