The taxpayer argued that the divorce decree should control who would claim the dependency exemption in the event his ex-wife was unemployed or the taxpayer failed to pay child support. That argument was rejected. The court found that it is Tax Code and not state orders that determine eligibility to claim a deduction for federal tax purposes.
This case concluded that a child may be treated as a qualifying child of the noncustodial parent if the custodial parent releases the claim to the exemption for the child and the noncustodial parent attaches the release to the return. Form 8332 has been developed by the IRS for this purpose. In this case Form 8332 was not signed by the ex-wife in a timely manner stating that she would not claim the dependency exemption. She also did not attach any release to her ex-husband’s form.
The court found that where both the custodial and noncustodial parent have claimed a dependency exemption for one year for the same child a declaration signed by the custodial parent after the period of limitations for assessments has expired as to the custodial parent could not qualify under Code Sec. 152(e)(2)(A). Congress intended to prevent a dependency exemption deduction for one child to be claimed by and allowed for two parents. The court also found in this case that the taxpayer was not entitled to head-of-household filing status or the child tax credit.
If you and your spouse are separated or going through a divorce and need tax advice on a related issue please contact the tax professionals at Lindemeyer CPA.