Income Tax Law (NOT a Divorce Decree), Determines Dependency Exemption

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A common element of every marital dissolution, where the divorcing parties have minor children, is the financial consideration and accountability of federal income tax savings associated with the dependency deductions under the law. Creativity within divorce settlements can provide for any number of ways in which this issue is addressed.

However, as one recent Tax Court case again confirms, the provisions of the Internal Revenue Code, and not the divorce decree, govern the availability of such deductions. In this case, the Tax Court denied a divorced, noncustodial parent the dependency exemption for his minor daughter because he did not meet the qualifying child requirements set forth in the Internal Revenue Code. (see related article, Dependency Rules for Divorced Taxpayers)

Representing himself, the Taxpayer failed to show that he met the support requirements, i.e., the provision of one-half of his daughter’s support for the year in question. He also did not demonstrate that he provided the principal abode for his daughter during that period. Further, the taxpayer failed to submit Form 8332 (Release/Revocation of Release of Claim to Exemption for Child by Custodial Parent) with his tax return.

While the terms of the divorce decree allowed the father to claim the exemption in odd years, if he was current in his child support payments, the requirements of the Internal Revenue Code were not met. As such, the Court had no alternative but to disallow the deduction for his daughter. Note, that the child tax credit and head of household filing status also were denied.

Successful planning for dependency deductions requires careful planning and care. This is especially true in marital dissolution proceedings. If you are involved in such matters and require information on dependency deductions, please contact Bob Grossman or Don Johnston at 412-338-9300.