<<...It does not matter whether you violate local law to the IRS. >>

I believe this is a time when local law does matter. The 1040 instructions spell out the five tests to meet in order to be considered a dependent. Under test 1, the relationship test, a number of family members are listed as qualifying (son, daughter, foster child, parents, etc.). The instructions state: "If the person is not your relative, the relationship must not violate local law." Pub. 501 also has similar language. Court cases have gone both ways on this issue, with the outcome depending on the state law of the taxpayer. Since this is tricky, I wanted to be sure Berger1000 considered it before discussing the rest of his question.