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Financial Planning / Tax Strategies
|Subject: Re: alimony/spousal support||Date: 11/15/1999 5:14 PM|
|Author: TMFTaxes||Number: 21159 of 122503|
<<I'd like to clarify the issue since the last answer is not entirely correct. It is not so definite, and there is a gray area. Further, the previous poster does not allow for any hope that a non-custodial parent can always sue the ex-spouse on a local level if an agreement regarding the dependent is violated.>>
You're right...the issue should most probably be clarified.
But rather than using Pub 17, let's use Publication 504...that deals with this issue directly.
First...the general rule...as I stated in my original post:
" Under the special rule, the parent who had custody of the child for the greater part of the year (the custodial parent) is generally treated as the parent who provided more than half the child's support. This parent is usually allowed to claim the exemption for the child, if the other dependency tests are met. However, see Noncustodial Parent, later.
Custody. Custody is usually determined by the most recent decree of divorce or separate maintenance, or a later custody decree. If there is no decree, use the written separation agreement.
If neither a decree nor an agreement establishes custody, then the parent who had physical custody of the child for the greater part of the year is considered the custodial parent. This also applies if a decree or agreement calls for "split" custody, or if the validity of a decree or agreement awarding custody is uncertain because of legal proceedings pending on the last day of the calendar year.
<< Although the IRS is tired of this issue, the IRS still does recognize explicitly written decrees.>>
But only if they are consistent with the issues. Pub 504 disusses those in the "non-custodial parent" section later on in the Publication. Let's take a look.
"Under the special rule, the parent who did not have custody, or who had it for the shorter time, is treated as the parent who provided more than half the child's support if:
1) The custodial parent signs Form 8332 or a similar statement agreeing not to claim the child's exemption, and the noncustodial parent attaches this statement to his or her return (see Form 8332, later)"
And this was the form that I was referring to when I stated that the custodial parent could sign away their rights to the dependent. Normally, the divorce decree allows that the non-custodial parent can claim the deduction (and the custodial parent will complete Form 8332) each year that support payments are current. It's a standard feature in most divorces. But the subject goes on...
2) A decree or written agreement made before 1985 provides that the noncustodial parent can take the exemption and he or she gave at least $600 for the child's support during the year. This is true unless the pre-1985 decree or agreement was modified after 1984 to specify that this provision will not apply."
As was noted, written agreements still work as long as they were made BEFORE 1985. Because the law changed in 1986, the custodial parent became the "king" (or, more likely, the "queen" at that time). No more did IRS have to fight over the decree or any other agreements. They only had to determine who the custodial parent actually was. And that's basically what they are doing. In this case federal law will superseed any state requirements and regulations regarding support, exemptions, etc. The publication even provides an example (and note...THE EXAMPLE IS FOR 1984...WHICH WOULD BE A TAX YEAR BEFORE 1985...SO THIS IS NOT THE WAY THE LAW WORKS FOR AGREEMENTS SIGNED AFTER 1985)
"Example 1. Under your 1984 divorce decree, your former spouse has custody of your child. The decree states that you can claim the child's exemption. You provided $1,000 of your child's support during the year and your spouse provided the rest. You are considered to have provided over half the child's support, even if your former spouse gave more than $1,000."
See how it works for a "prior" agreement? Let's look at the example from the publication for a more current agreement...one that takes place after 1985:
"Example 2. You and your spouse provided all of your child's support. Under your 1988 written separation agreement, your spouse has custody of your child. Because the agreement was made after 1984, you are considered to have provided over half the child's support only if your spouse agrees not to claim the child's exemption on Form 8332 or a similar statement."
<< Please see Publication 17 and go to the section "Support test for children of Divorced or Separated Parents." There is an easy graph that outlines some scenarios (Figure 3-B). If the custodial parent did not sign a form 8332 or write a letter releasing the exemption, the non-custodial parent CAN still pass the support test if there is a "decree or agreement executed after 1984 that unconditionally entitles the noncustodial parent to the exemption.">>
Right you are...and this is where the clarification is really required. Here is what the Publication has to say on this issue:
" Similar statement. If your divorce decree or separation agreement went into effect after 1984 and it states that you can claim the child as your dependent without regard to any condition, such as payment of support, you can attach to your return copies of the following pages from the decree or agreement instead of Form 8332:
1) The cover page (write the other parent's social security number on this page),
2) The page that states you can claim the child as your dependent, and
3) The signature page with the other parent's signature and the date of the agreement. "
But please note that this ONLY applies if the non-custodial parent was given the UNCONDITIONAL right to claim the child (i.e., the exemption is not negotiated between the parents, and there are no conditions that must be met for the non-custodial parent to claim the deduction). This is not something that you see in a "normal" divorce situation...but it certainly does happen...and certainly something that you should be aware of.
But...also a word of caution from the Publication. If there is some kind of condition placed on the exemption status, the whole thing could go out the window. Here's the caution provided in the Publication:
"CAUTION: If your divorce decree or separation agreement went into effect after 1984 and it states that you can claim the child as your dependent if you meet certain conditions, you must attach to your return Form 8332 or similar statement from the custodial parent releasing the exemption. "
So as was pointed out, it's certainly not an all or nothing situation. But, as a rule of thumb, the custodial parent will claim the dependent deduction unless the custodial parent gives that exemption to the non-custodial parent. As you point out, there are certainly exceptions to the rule.
This entire issue was pointed out in the Taxes FAQ area regarding children of divorced and separated parents. I guess next time I should just lead the reader directly to those FAQs.
Thanks for the clarification...
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