Tax News

CCH (cch.taxgroup.com) reports:

  The IRS has finalized a regulation on the entitlement of divorced or separated parents or parents who lived apart at all times during the last six months of the year to claim a child as a dependent. The regulation covers the manner of releasing a claim to an exemption and revoking a release of a claim, sets forth definitions and rules for specific situations, and provides numerous examples illustrating how the rules should be applied. The regulation generally applies to tax years beginning after July 2, 2008.

Release of Claim

  Consistent with Code Sec. 152(e), the final regulation provides that a taxpayer can only claim a dependency deduction for a qualifying child or qualifying relative of the taxpayer. In order for a child to be treated as a qualifying child or qualifying relative of a noncustodial parent, the custodial parent must release a claim to the exemption. Under the final regulation, a release of a claim to an exemption can only be executed on: (1) Form 8332, Release/Revocation of Release of Claim to Exemption for Child by Custodial Parent, or successor form; or (2) a written declaration that is not on Form 8332 but conforms to the substance of that form and that is a document executed for the sole purpose of releasing the claim.

  A court order or decree or a separation agreement cannot serve as the written declaration. The noncustodial parent must attach a copy of Form 8332 or the written declaration to the parent's return for each year that the child is claimed as a dependent.

Revocation of Release

  A custodial parent who has released a claim to an exemption may revoke the release by providing written notice of the revocation to the other parent. Under the final regulation, a revocation can be executed on: (1) Form 8332, Release/Revocation of Release of Claim to Exemption for Child by Custodial Parent, or successor form; or (2) a written declaration that is not on Form 8332 but conforms to the substance of that form and that is a document executed for the sole purpose of serving as a revocation.

  The revocation cannot be made effective any earlier than the tax year that begins in the first calendar year after the calendar year in which the parent revoking the release of claim provides written notice or makes reasonable efforts to provide reasonable notice to the other parent. The parent revoking the release of claim must attach a copy of the revocation to the parent's return for each year that the child is claimed as a dependent.

Definitions

  The final regulation also defines the terms "custody" and "custodial parent" for purposes of Code Sec. 152(e). A child is in the custody of one or both parents for more than one-half of the calendar year if one or both parents have the right under state law to physical custody of the child for more than one-half of the calendar year. However, a child is not in the custody of either parent when the child reaches the age of majority under state law.

  A custodial parent is the parent with whom the child resides for the greater number of nights during the calendar year (the "counting nights" rule). Under the final regulation, a child resides for a night with a parent if the child: (1) sleeps at the parent's residence, whether or not the parent is present, or (2) sleeps in the company of the parent when the child does not sleep at a parent's residence, such as when the parent and child are on vacation. A night is not counted for either parent if the child would not have resided with either parent for the night or it cannot be determined with which parent the child would have resided for the night. The final regulation also adds an exception to the counting nights rule where a child resides for a greater number of days, but not nights, with a parent who works at night.

T.D. 9408, 2008FED ¶47,043

Other References:

 
Code Sec. 152

  CCH Reference - 2008FED ¶8150

  Tax Research Consultant

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