Qualifying relative?

[Margaret CPA in OH]

New clients, mother 78 and daughter 57, want to have daughter as dependent.  Daughter has been on Social Security disability for several years but it is much more than the $4050 income to qualify for dependent relative.  Or does it not count at all as income?  If it doesn't count, would any other income count? Daughter cashed in CD's for $5600 but basis was $5600 and she has LCF exceeding $3000 so no taxable income.  My reading says gross income so it seems she doesn't qualify, right?  But what if there was only the SS?  Her SSA-1099 looks like all others but I just know she has disability and is not near full retirement age.  Just never had this before in all my years.  Lucky, I guess!

[Pacun]

On another post, someone said that non taxable doesn't count. I don't know if it does.

If your child is permanently disable, you can claim them regardless of how much they make as long as they don't provide more than 50% towards their own support.

[Margaret CPA in OH]

This is not a child; the daughter is 57.  I'm just not sure because the SSA-1099 looks like any other.  In any event, the mother does provide more than 50% of the adult daughter's support but the adult daughter has gross income of $8500 SSA and $5600 cd's matured.

[Lion EA]

There is no age test for a permanently disabled child.  If the other tests are met, the child will be a QC.

[Margaret CPA in OH]

Thanks, Lion.  I'm not asking about the age. She may be considered a child but wasn't deemed disabled until in her 40's so I think relative or child works. It's the support test.  I'm asking whether the $8500 on Form SSA-1099 counts towards the income test of $4050 for relative or does she revert to being a child after becoming disabled as an adult?.  For 2016, it probably doesn't matter except that the cd income is reported at $5600 but, with a loss carry forward of $3000+, it isn't taxable nor is the Social Security.  I'm asking about the definitions of Gross Income for the income test.  I haven't found the answer to these two income sources.

[Pacun]

As I said before... if it is your permanently disabled child, he/she can make millions and you can claim him/her as long as he/she didn't provide more than 50% of her own support.

By the way child means at least son and daughter, regardless of age.

[jklcpa]

Forget the qualifying relative test for now. I think you need to go back and look at the qualifying child rules for the daughter for 2016. If you look at the 7 tests for QC, they are:

• Must not be able to be claimed by anyone else, including self
• Joint return test
• Citizen or resident test
• Relationship test
• Member of household for > 1/2 the year
• Age test:
•     - must be under 19 and younger than taxpayer claiming
•     - under 24 & a student at least 5 mos of year and younger than TP claiming
•     - any age and permanently and totally disabled. Means can't engage in gainful activity because of physical or mental condition AND doctor has determined that the condition will last continuously for at least a year or will lead to person's death.  This is pretty much a given if the person is already getting SSI. 
• Support test - dependent must not provide over 1/2 of own support

 

1 hour ago, Margaret CPA in OH said:

This is not a child; the daughter is 57. 

For those that are permanently and totally disabled, Sec 152(c)(3)(B ) covers the age requirement, basically saying that age is not a factor for meeting the requirements of the age test in determining if one is a qualifying child if permanently and totally disabled.  It does not matter when she became disabled; she will meet the age test.

Notice that income isn't directly one of the QC tests but support is.  If the daughter is truly disabled, then the income test (like is used in determining QRs) doesn't matter, but what does matter is how much support she provided for herself vs how much the mom provided. If you look at the support worksheet, line 1 is "funds available at the beginning plus taxable and nontaxable income, plus amounts borrowed, plus amounts in savings.  You'll include the $5600 of CD as savings because its really just cash, but don't include its redemption as income or you'll be counting it twice. Add in the SSI and anything else daughter has as the starting point. 

You just have to work through the numbers and find out how much of that daughter spent on herself vs how much mom provided. If daughter banked all resources and didn't spend one penny on herself and mom provided all, or more than 1/2, then mom can claim her as a qualifying child.

[Margaret CPA in OH]

Okay then, pounding it through my head Even though this child was a fully functioning adult without disability for some decades, she is still the mother's child so qualifies but now it isn't the income test question, but the support question.  Got it and thanks! 

Some days are just harder than others....