Service Agrees—Unmarried Parent Can Claim/Waive Dependency Exemption.

The IRS follows the Tax Court’s lead.

n King , 121 TC 245 (2003), the Tax Court held that the IRC section 152(e) support test applies even if the parents were never married to one another (for background see “ Who Gets the Exemption? JofA , Jan.04, page 86). Now, the IRS has revised both a form and a publication to conform to this decision. CPAs should be aware of this important new development.

Generally under section 152(a), a parent who provides more than half of the support for a child during a tax year can claim a dependency exemption on his or her tax return ($3,100 for 2004). However, a special support test applies under section 152(e) to parents legally divorced or separated or who lived apart at all times during the last six months of the year. The child is treated as a dependent of the parent who had custody for the greater portion of the year (the custodial parent); the noncustodial parent cannot claim a dependency exemption on his or her return.

However, the custodial parent can release his or her right to claim the exemption by using Form 8332, Release of Claim to Exemption for Child of Divorced or Separated Parents, and providing it to the noncustodial parent. The release can be for the current year, a set number of years or all future years. The noncustodial parent must attach form 8332 to his or her return for each year he or she claims the exemption.

In 1988 Monique’s mother signed form 8332 to waive her right to claim a dependency exemption for her daughter for 1987 and all future tax years. Jimmy Lopez, Monique’s father (who was never married to her mother), claimed his daughter as a dependent from 1987 to 1999 and attached that form 8332 to his return each year.

Monique’s mother married Mr. King in 1993 and began to claim Monique as a dependent on her joint return. The IRS issued notices of deficiency to Mrs. King and her husband and Mr. and Mrs. Lopez (Mr. Lopez also had since married) for tax years 1998 and 1999. Monique resided with the Kings during 1998 and 1999, and they provided more than half of her support for those years.

Section 152(e) does not state that the parents must be married to one another. Thus, the Tax Court applied that section’s special support test and ruled for the Lopezes, as Mrs. King had validly waived the exemption.

The IRS recently revised form 8332 and Publication 504, Divorced or Separated Parents, to allow parents who have never been married to each other to release their dependency exemption without IRS challenge. Additionally, the IRS modified publication 504 to remove the marriage requirement when applying the section 152(e) support test.

For more information see the Tax Clinic, edited by Jerry Lerman, in the April 2004 issue of The Tax Adviser.

—Lesli Laffie, editor
The Tax Adviser

Notice to readers: Members of the AICPA tax section may subscribe to The Tax Adviser at a reduced price. Contact Judy Smith at 202-434-9270 for a subscription to the magazine or to become a member of the tax section.

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