I didn't know #2

[jainen]

Tax Court case Pamela L. Brooks v. Commissioner, (2013) TC Memo 2013-141

Taxpayer claimed grandson as qualifying child, but lost tiebreaker because child's mother also claimed him. Mother apparently amended her return to delete the exemption (IRS disputes that 1040X was actually filed). Court ruled, "On this record, we cannot conclude that [parent] has released her claim to the dependency exemption deduction.

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Respondent concedes that N.J. was a qualifying child of petitioner during 2006. Respondent contends, however, that petitioner was not entitled to a dependency exemption deduction for N.J. because his mother, Monique Bias, claimed N.J. as a qualifying child for 2006 and as his parent, she is entitled to the dependency exemption deduction for N.J. under the tiebreaker rule of section 152©(4)(A). Monique Bias claimed a dependency exemption deduction for N.J. on her Form 1040 for 2006. She did so even though she told petitioner that petitioner could claim the dependency exemption deduction for N.J. for 2006. Petitioner did not know that Monique Bias had claimed the dependency exemption deduction for N.J. until the IRS audit of petitioner's returns.

Petitioner contends that, despite the fact that Monique Bias claimed a dependency exemption deduction for N.J. on her 2006 return, petitioner still is entitled to a dependency exemption deduction for N.J. To support her contention, petitioner introduced a copy of a purported 2006 Form 1040X, Amended U.S. Individual Income Tax Return, for Monique Bias. The Form 1040X bears the signature of Monique Bias and is dated September 18, 2008. On the Form 1040X Monique Bias decreases by one the number of dependency exemption deductions she claimed. In the explanation of changes, she explains that she is requesting the change because petitioner provided more than half of N.J.'s support during 2006.

The Form 1040X petitioner produced is not credible evidence that Monique Bias released her claim to the dependency exemption deduction for N.J. The Form 1040X was not prepared until the IRS had begun auditing petitioner's 2006 return. Although Monique Bias signed the Form 1040X, she had not filed the Form 1040X with the IRS as of the time of trial. Although both petitioner and Monique Bias testified that they had agreed that petitioner would claim the dependency exemption deduction for N.J., Monique Bias still claimed the dependency exemption deduction on her Form 1040. On this record, we cannot conclude that Monique Bias has released her claim to the dependency exemption deduction for N.J. for 2006. Accordingly, as N.J.'s mother, Monique Bias is entitled to the dependency exemption deduction for N.J. pursuant to the tiebreaker rule of Section 152©(4)(A). We therefore sustain respondent's determination disallowing petitioner's claimed dependency exemption deduction for N.J. for 2006.

[Guest Taxed]

Where is a 8332 when you really need one??

[Terry D EA]

Hmmmm, it looks like the culprit here is the attempted late filing of the 1040X. As I see it, proof of the filings is always essential. Interesting read.

[Don in Upstate NY]

... In the explanation of changes, she explains that she is requesting the change because petitioner provided more than half of N.J.'s support during 2006. ...

Even if that were true, it would not effect the mother's ability to claim the dependency deduction. Since they were both claiming N.J. as a qualifying child, the only support test is that N.J. is not providing his own support. Who is actually supporting him is irreverent.

Where is a 8332 when you really need one??

I missed that part about the grandparent being N.J.'s bio-dad.

[Guest Taxed]

I follow an old AARP article that advised grandparents who were going to take the dependency exemption, CTC etc. because they really took care of their grandchildren (meeting all IRS tests) to also get a 8332 signed by the parent of the child to prove intention. I understand that a 8332 is between the custodial and non custodial parent but it can also serve to prove the point.

[kcjenkins]

What was really needed was for the grandparent to take the daughter down to the local IRS office and witness her filing that 1040X. Since she is clearly not too sharp, or else not too honest! Granny should probably know her child well enough to expect some nasty surprises like this.

[Guest Taxed]

>>>What was really needed was for the grandparent to take the daughter down to the local IRS office and witness her filing that 1040X.<<<

And then when you are called on it the IRS employee takes the 5th!

[HV Ken]

I follow an old AARP article that advised grandparents who were going to take the dependency exemption, CTC etc. because they really took care of their grandchildren (meeting all IRS tests) to also get a 8332 signed by the parent of the child to prove intention. I understand that a 8332 is between the custodial and non custodial parent but it can also serve to prove the point.

A little off topic, but curious. If a divorce decree states that the non-custodial parent is entitled to claim the children on their tax return, do people still get the custodial parent to sign the 8332?

[Guest Taxed]

In the good old days you could send in copies of the divorce decree that stipulates that. But now I believe IRS wants 8332 if there is a dispute. As a matter of practice i always recommend a 8332 anytime a non custodial parent or grand parent will be taking the dependency exemption etc. Lately you see a lot of young single mother's move in with their own parents and for all practical purpose grand parents are supporting their grand kids!

[Lynn EA USTCP in Louisiana]

YES

[jainen]

>>If a divorce decree states that the non-custodial parent is entitled to claim the children on their tax return, do people still get the custodial parent to sign the 8332?<<

According to the Regs for Section 152, concerning Form 8332, "A court order or decree or a separation agreement may not serve as a written declaration." However, you can still attach the decree if it has the right information and was signed before 2009 when this reg took effect.

The problem is that a divorce decree almost never has the right information needed for the release. Since it has a different definition for "custodial," it doesn't specifically declare that the parent with whom the child spent the most nights will not claim the exemption for the specific year. And it usually is conditional, depending on child support or other factors. Anyway, why would a tax preparer want to take on the responsibility of interpreting a divorce decree?

Also remember that the 8332 was never updated for the qualified child rules. It is only valid if the parents provide more than half the support, that is, the old rules now called qualified relative. Be careful when welfare, grandparents, or new boyfriend are involved.