Dependency exemptions: Tax Court is strict on noncustodial parents.

• Author: Bakale, Anthony

Another Tax Court case has made it clear that noncustodial parents must adhere to the letter of the law when claiming dependency exemptions. In Millet;, 114 TC 184 (2000), the court upheld past rulings that a divorce decree awarding the exemption to the noncustodial parent has no validity unless it conforms to the substance of Form 8332, Release of Claim to Exemption for Child of Divorced or Separated Parents.

Facts

In Miller, the taxpayer and her husband were divorced; the state court issued Permanent Orders on Jan. 24, 1994, granting Ms. Miller sole custody of the children. The orders also provided that her ex-husband (Mr. Lovejoy) "shall claim both of [the] children on his tax returns as exemptions." The Permanent Orders were not signed by Ms. Miller, but were signed by attorneys for Ms. Miller and Mr. Lovejoy under a caption that stated "APPROVED AS TO FORM."

As provided for in the Permanent Orders, Mr. Lovejoy claimed his children as dependents on his 1993 and 1994 Federal income tax returns. Instead of attaching a completed Form 8332, Mr. Lovejoy attached a copy of the Permanent Orders that awarded the dependency exemptions to him. Ms. Miller did not claim the exemptions on her returns.

Issue

Special rules apply when a divorced parent wishes to claim a minor child as a dependent. Assuming the other dependency tests are met, Sec. 152(e) determines which parent will be allowed to claim the dependency exemption. The general rule of Sec. 152(e) is that:

1. If a child receives more than one-half of the support during a calendar year from his parents, and

2. The parents are divorced or legally separated, or

3. Lived apart at all times for the last six months of the year and

4. The child is in the custody of his parents for more than half the year, the child is treated as receiving more than half his support from the parent who had custody for the greater portion of the calendar year.

   That parent is known as the "custodial parent." Sec. 152(e) provides three exceptions to the general rule that the custodial parent is deemed to meet the support test.

   First, the custodial parent may choose to release the claim to the exemption to the noncustodial parent. To effect the transfer, the custodial parent signs a written declaration, either Form 8332 or a document that conforms to the substance of that form. Form 8332 states that the custodial parent will not claim the child as a dependent for the current tax year and the custodial parent can indicate future years as well. Form 8332 provides blanks for the names and Social Security numbers of the parents, the child's name, the tax year and the signature of the custodial parent who releases the claim. The...