544. What conditions must be met to entitle the taxpayer to a dependency exemption?Nuco Employeercline212014-07-25T18:40:00Z2014-07-25T18:40:00Z612076883Hewlett-Packard5716807414Site Map/General Income Taxation/Individuals/Exemptions2005-01-18T00:00:00ZTaxFactsDefaultArticle123961426-00-tf2.xml1426.00;#1725;#0x010100C568DB52D9D0A14D9B2FDCC96666E9F2007948130EC3DB064584E219954237AF3900242457EFB8B24247815D688C526CD44D009C4E67E972694125ABDA91AC61F5E51FTax Facts 2What conditions must be met to entitle the taxpayer to a dependency exemption?44200.0000000000TaxFactsDefaultArticleSBMEDIA\moss-admin2010-01-14T23:00:04Z4111dbb3-6119-41fc-9d9c-28768801cec4|a711c32e-f204-4ac0-aa39-af3b4bde9c21|3a527fe3-5798-46e3-ba38-275deec72cfb544.01. What conditions must be met to entitle the taxpayer to a dependency exemption?A taxpayer may claim the dependency exemption for each dependent with respect to whom the following tests are met.IRC Secs. 151, 152. The term “dependent” means a “qualifying child” (see below) or a “qualifying relative” (see below).IRC Sec. 152(a).Dependents may not claim a personal exemption for themselves in addition to the exemption claimed by the taxpayer who supports them.IRC Sec. 152(b)(1). The dependent, if married, must not file a joint return with his or her spouse.IRC Sec. 152(b)(2). In addition, the term “dependent” does not include an individual who is not a citizen or resident of the United States (or a resident of Canada or Mexico). However, a legally adopted child who does not satisfy the residency or citizenship requirements may nevertheless qualify as a dependent if certain requirements are met.IRC Sec. 152(b)(3).The taxpayer may claim the exemption even though the dependent files a return. The taxpayer must include the Social Security number of any dependent claimed on his return.See, e.g., Miller v. Comm., 114 TC 184 (2000).Qualifying child. The term “qualifying child” means an individual who:(1)is the taxpayer’s “child” (see below) or a descendant of such a child, or the taxpayer’s brother, sister, half brother, half sister, stepbrother, stepsister or a descendant of any such relative;(2)has the same principal place of abode as the taxpayer for more than one-half of the taxable year;(3)is younger than the taxpayer claiming the exemption and (i) has not attained the age of 19 as of the close of the calendar year in which the taxable year begins, or (ii) is a student who has not attained the age of 24 as of the close of the calendar year;(4)has not provided over one-half of the individual’s own support for the calendar year in which the taxpayer’s taxable year begins; and(5)has not filed a joint tax return (other than for a refund) for the taxable year.IRC Sec. 152(c), as amended by FCSIAA 2008. See also FS-2205-7 (Jan. 2005).The term “child” means an individual who is: (1) a son, daughter, stepson, or stepdaughter of the taxpayer; or (2) an “eligible foster child” of the taxpayer.IRC Sec. 152(f)(1). An “eligible foster child” means an individual who is placed with the taxpayer by an authorized placement agency or by judgment decree, or other order of any court of competent jurisdiction.IRC Sec. 152(f)(1)(C). Any adopted children of the taxpayer are treated the same as natural born children.IRC Sec. 152(f)(1)(B).Qualifying relative. The term “qualifying relative” means an individual:(1)who is the taxpayer’s:(i) child or a descendant of a child,(ii) brother, sister, stepbrother, or stepsister,(iii) father or mother or an ancestor of either, or stepfather or stepmother,(iv) son or daughter of a brother or sister of the taxpayer,(v) brother or sister of the father or mother of the taxpayer,(vi) son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law, or sister-in-law, or(vii) an individual (other than a spouse) who, for the taxable year of the taxpayer, has the same principal place of abode as the taxpayer and is a member of the taxpayer’s household;(2)whose gross income for the calendar year in which the taxable year begins is less than the exemption amount (see below);(3)for whom the taxpayer provides over one-half of the individual’s support for the calendar year in which the taxable year begins; and(4)who is not a qualifying child of the taxpayer or of any other taxpayer for any taxable year beginning in the calendar year in which the taxable year begins.The Service has provided guidance for determining whether an individual is a qualifying relative for whom the taxpayer may claim a dependency exemption deduction under IRC Section 151(c). The guidance clarifies that an individual is not a qualifying child of “any other taxpayer” if the individual’s parent (or other person with respect to whom the individual is defined as a qualifying child) is not required (by IRC Section 6012) to file an income tax return and either (1) does not file an income tax return, or (2) files an income tax return solely to obtain a refund of withheld income taxes.Notice 2008-5, 2008-2 IRB 256.The amount of the personal exemption ($3,950 in 2014, $3,900 in 2013, $3,800 in 2012 and $3,700 for 2011) is adjusted annually for inflation. The exemption is subject to phaseout for certain upper income taxpayers (but not in 2010-2012). For details, see Q 543.Life insurance premiums on a child’s life are not included in determining the cost of the child’s support.Kittle v. Comm., TC Memo 1975-150; Vance v. Comm., 36 TC 547 (1961).The Tax Court held that a dependent’s self-employment loss did not reduce her earned income for purposes of determining her standard deduction under IRC Section 63(c)(5)(B).Briggs v. Comm., TC Summary Opinion 2004-22. 544.02. Who is entitled to claim a dependency exemption for a child in the case of divorced parents?In the case of divorced parents who between them provide more than one-half of a child’s support for the calendar year, and have custody of the child for more than one-half of the calendar year, the custodial parent (i.e., the one having custody for the greater portion of the year) is generally allowed the dependency exemption. However, the noncustodial parent can claim the exemption if the custodial parent signs a written declaration (i.e., Form 8332, or a statement conforming to the substance of Form 8332) agreeing not to claim the child as a dependent, and the noncustodial parent attaches the declaration to the tax return for the calendar year. The noncustodial parent can also claim the exemption if a divorce decree or separation agreement executed before 1985 expressly provides such and he provides at least $600 for the support of the child during the calendar year.IRC Secs. 152(e)(1), 152(e)(2); Treas. Reg. §1.152-4. The Tax Court held that the special support rule under IRC Section 152(e) applies to parents who have never been married as well as divorced parents.King v. Comm., 121 TC 245 (2003). See also Preamble, REG-149856-03, 72 Fed. Reg. 24192, 24194 (5-2-2007). The Service has clarified that a custodial parent may revoke the release of the dependency exemption and, therefore, claim the dependency exemption himself, but only if the noncustodial parent agrees and does not claim the child.Legal Memorandum 200007031.In Miller v. Comm.,114 TC 184 (2000). the Tax Court denied the dependency exemption to the noncustodial parent where the custodial parent had not signed a release of the claim to the exemption. The court order, which gave the noncustodial parent the right to claim the exemption, was held not to be a valid substitute.In Boltinghouse v. Comm.,TC Memo 2003-134. the Tax Court held that there is no requirement in IRC Section 152(e) or the regulations that a spouse’s waiver of his claim to a dependency exemption deduction be incorporated into a divorce decree to be effective. The court stated that such a requirement would make Form 8332 itself ineffective on its own. The court also recognized that under the applicable state law (Delaware), the separation agreement created binding contractual obligations that did not cease upon the entry of a divorce decree (regardless of whether the agreement was merged or incorporated into the decree).In Omans v. Comm.,TC Summary Opinion 2005-110. the Tax Court determined that the custodial parent’s certified signature on the settlement agreement signified her sworn agreement to the settlement agreement’s contents, including her former spouse’s entitlement to the dependency exemption.A state appeals court held that federal law does not preempt a state family law court in its discretion from alternating the dependency exemption between the parents, even though one parent may have custody during the calendar year for less than half the year.Rios v. Pulido, 2002 Cal. App. LEXIS 4412 (2nd App. Dist. 2002).The IRS has provided interim guidance under IRC Section 152(c)(4), which is the rule for determining which taxpayer may claim a qualifying child when two or more taxpayers claim the same child. It clarifies that unless the special rule in IRC Section 152(e) applies (see above), the tie-breaking rule in IRC Section 152(c)(4) applies to the head of household filing status, the child and dependent care credit, the child tax credit, the earned income credit, the exclusion for dependent care assistance, and the dependency deduction as a group, rather than on a section-by-section basis.Notice 2006-86, 2006-51 IRB 680.