Final Regs for Form 8332

[jainen]

Final regs concerning a non-custodial parent claiming a dependent were issued last week. They specifically state that a divorce decree can NEVER be used as a substitute for Form 8332, EVEN IF both parents agree unconditionally and the order contains all the elements of Form 8332. A release of claim not on Form 8332 must be on a document executed for the sole purpose of releasing the claim.

[Lion EA]

Thanks, Jainen. Think I'll pass that along to my "family law" attorney aquaintances, also.

[Jack from Ohio]

Final regs concerning a non-custodial parent claiming a dependent were issued last week. They specifically state that a divorce decree can NEVER be used as a substitute for Form 8332, EVEN IF both parents agree unconditionally and the order contains all the elements of Form 8332. A release of claim not on Form 8332 must be on a document executed for the sole purpose of releasing the claim.

Jainen, can you post a link or a referral to the reg? This is very relevant to many of our clients here at my firm. Thank You!!

[jainen]

>>post a link or a referral to the reg<<

Sorry, I should have, but it's exactly where you would expect it, Section 1.152-4(e).

"(ii) Form designated by IRS. A written declaration may be made on Form 8332, Release/Revocation of Release of Claim to Exemption for Child by Custodial Parent, or successor form designated by the IRS. A written declaration not on the form designated by the IRS must conform to the substance of that form and must be a document executed for the sole purpose of serving as a written declaration under this section. A court order or decree or a separation agreement may not serve as a written declaration. "

If you can find Tax Decisions, TD-9408 has the background. It's worth reading because it also explains "counting nights" to determine who is the custodial parent.

Effective date: 7/2/08

[Jack from Ohio]

>>post a link or a referral to the reg<<

Sorry, I should have, but it's exactly where you would expect it, Section 1.152-4(e).

"(ii) Form designated by IRS. A written declaration may be made on Form 8332, Release/Revocation of Release of Claim to Exemption for Child by Custodial Parent, or successor form designated by the IRS. A written declaration not on the form designated by the IRS must conform to the substance of that form and must be a document executed for the sole purpose of serving as a written declaration under this section. A court order or decree or a separation agreement may not serve as a written declaration. "

Effective date: 7/2/08

Thanks!!

[kcjenkins]

http://www.centerfortaxstudies.com/blog/ta...008/07/02/p5578

Definitions

The final regulation also defines the terms "custody" and "custodial parent" for purposes of Code Sec. 152(e). A child is in the custody of one or both parents for more than one-half of the calendar year if one or both parents have the right under state law to physical custody of the child for more than one-half of the calendar year. However, a child is not in the custody of either parent when the child reaches the age of majority under state law.

A custodial parent is the parent with whom the child resides for the greater number of nights during the calendar year (the "counting nights" rule). Under the final regulation, a child resides for a night with a parent if the child: (1) sleeps at the parent's residence, whether or not the parent is present, or (2) sleeps in the company of the parent when the child does not sleep at a parent's residence, such as when the parent and child are on vacation. A night is not counted for either parent if the child would not have resided with either parent for the night or it cannot be determined with which parent the child would have resided for the night. The final regulation also adds an exception to the counting nights rule where a child resides for a greater number of days, but not nights, with a parent who works at night.

Revocation of release of claim.

Under both the final and proposed regs, a custodial parent who released the right to claim a child could revoke the release for future tax years by providing written notice of the revocation to the other parent. The final regs require that the parent revoking the release notify, or make reasonable attempts to notify, in writing, the other parent of the revocation. What is a reasonable attempt is determined under the facts and circumstances, but mailing a copy of the written revocation to the noncustodial parent at the last known address or at an address reasonably calculated to ensure receipt satisfies this requirement. A revocation can be made on Form 8332, or successor form designated by IRS. A revocation not on the designated form must conform to the substance of the form and be in a document executed for the sole purpose of revoking a release. A taxpayer revoking a release may attach a copy rather than an original to the taxpayer's return for the first tax year the revocation is effective, as well as for later years. (T.D. 9408, 07/01/2008, Reg. § 1.152-4(e)(3))

The final regs also clarify that a multiple year written declaration executed in a tax year beginning on or before July 2, 2008, that satisfies the requirements for the form of a written declaration in effect at the time the written declaration was executed is treated as satisfying the requirements for the form of a release under the final regs. However, the rules for revoking a release of a claim to an exemption apply without regard to whether a custodial parent executed the release in a tax year beginning on or before July 2, 2008; such a release executed may be revoked. (Reg. § 1.152-4(e)(5))

THIS LAST PART MAY LEAD TO SOME HEADACHES FOR US ALL DOWN THE ROAD. SORT OF MAKES A MOCKERY OF THE WHOLE IDEA OF THE MULTIPLE-YEAR RELEASE, IMHO.

[jainen]

>>The final regulation also defines the terms "custody" and "custodial parent" for purposes of Code Sec. 152(e)<<

Be careful with this. It only applies to section (e), not (c ) qualifying child or (d) qualifying relative. There are no regs for QC and QR yet, so we can't say, for example, that counting nights determines the "principal place of abode."

Form 8332 only works when one or both parents have both legal and physical custody, which usually means Qualifying Child, but I expect we will have some conflicts. For one thing, it only applies if the parents themselves are supporting the child--when Grandma or Social Security or welfare is paying the bills, the 8332 is not valid.

Many other interesting matters to consider here, like nights don't count after child turns 18.