Or, You Must Follow the Form
This lesson comes the hard way for Mickel and Mary Briscoe, in 2011 T.C. Mem. 165, filed 7/11/11. Mickel and ex-wife Nedra had a son, J.B., then they divorced. The divorce decree gave Nedra sole custody of J.B., but awarded her child support. Mickel paid; Nedra asked for more. The Louisiana Court gave it to her, but decreed that Mickel would get the dependency exemption. Mickel paid the increased amount.
Mickel and current wife Mary filed their 1040 for the year in issue and attached the second decree, which Nedra had signed but which did not contain Nedra’s SSAN or specify for what years Mickel would get the exemption. Mickel and Mary claimed J.B. as a dependent, but so did Nedra, who either forgot about the decree or didn’t care. Neither Nedra nor Mickel and Mary attached Form 8332, Release of Claim to Exemption for Child of Divorced or Separated Parents, to their respective returns.
To be a dependent, one must be a qualifying child or qualifying relative. J.B. isn’t Mickel’s qualifying child because he didn’t live more than half the year with Mickel. Nor he is Mickel’s qualifying relative. See Section 152(d)(1)(A)- (D). Judge Vasquez said: “The two pertinent requirements are that the taxpayer must provide over one-half of the individual’s support for the taxable year and the individual must not be a qualifying child of the taxpayer or of any other taxpayer for the taxable year. Sec. 152(d)(1)(C) and (D).
“Mr. Briscoe did not substantiate the amount of J.B.’s support from all sources…. Mr. Briscoe also did not establish that J.B. was not a qualifying child of any other taxpayer….” 2011 T.C. Mem. 165, at pp. 3-4.
However, there is a savings clause, Section 152(e)(1) and (2). Judge Vasquez unpacks the clause: “A child will be treated as the noncustodial parent’s qualifying child or qualifying relative if five requirements are met. See sec. 152(e)(1) and (2). The relevant requirements here are that the custodial parent sign a written declaration, in such manner and form as the Secretary may prescribe, that the custodial parent will not claim the child as a dependent and that the noncustodial parent attach that declaration to the noncustodial parent’s return for the taxable year. Sec. 152(e)(2)(A) and (B).
“The Internal Revenue Service issued Form 8332 in order to standardize the written declaration required by section 152(e). See, e.g., Chamberlain v. Commissioner, T.C. Memo. 2007-178. Form 8332 requires a taxpayer to furnish: (1) The name of the child; (2) the name and Social Security number of the noncustodial parent claiming the dependency exemption deduction; (3) the Social Security number of the custodial parent; (4) the signature of the custodial parent; (5) the date of the custodial parent’s signature; and (6) the year(s) for which the claims were released. See Miller v. Commissioner, 114 T.C. 184, 190 (2000), affd. on another ground sub nom. Lovejoy v. Commissioner, 293 F.3d 1208 (10th Cir. 2002). Although taxpayers are not required to use Form 8332, any other written declaration executed by the custodial parent must conform to the substance of Form 8332. See id. at 189. The general instructions for Form 8332 state that a divorce decree may be attached to the Form 1040 instead of Form 8332 if the decree states all of the items listed above, specifically the years for which the claim is released and the custodial parent’s Social Security number. Section 152(e) allows a noncustodial parent to claim the dependency exemption deduction only when that parent attaches a valid Form 8332 or its equivalent to a Federal income tax return for the taxable year for which he or she claims the dependency exemption deduction. See Paulson v. Commissioner, T.C. Memo. 1996-560.” [Footnotes omitted.] 2011 T.C. Mem. 165, at pp. 5-6.
Mickel attached the divorce decree, but it didn’t specify the years for which Mickel was to utilize the exemption, nor did it state Nedra’s SSAN. So no exemption, and no Child Tax Credit, even though Mickel did support J.B.
Judge Vasquez sees how hard this hits Mickel and Mary: “We are not unsympathetic to petitioners’ position. We also realize that the statutory requirements may seem to work harsh results to taxpayers, such as Mr. Briscoe, who are current in their child support obligations and who are entitled to claim the dependency exemption deductions or child tax credits under the terms of a child support order. However, we are bound by the statute as written and the accompanying regulations when consistent therewith.” [Citations omitted.] 2011 T.C. Mem. 165, at pp. 7-8.
Takeaway for family lawyers: make sure your decrees allocate exemptions and credits specifically, and follow the Form 8332 six-part release tests. Judge Vasquez said five, but I count six.