U.S. Tax Court has ruled that prohibition against using Trial Court order, decree, or separation agreement as written declaration for purposes of claiming dependency exemption is not applicable to those that were executed in taxable year beginning on or before July 1, 2008 (the effective date of the prohibition). In the case of Swint v. Commissioner, Mother gave birth to Father’s child in 1997. On February 13, 1998, Father and Mother entered into “agreed entry” in Ohio Trial Court that, among other things, provided that Father could claim dependency exemption for their Child if he was current in his child support payments, but the exemption would revert to Mother if Father fell behind in his payments. Neither Mother nor Father signed the agreed entry.
In 2000, Father married Wife. Between 2000 and 2010, Father and Wife filed joint federal income tax returns. When they filed their 2009 return, they claimed the dependency exemption for Child, along with a child tax credit. However, Child did not live with Father and Wife during 2009. In 2010, Father died.
On February 6, 2012, the IRS sent Wife a deficiency notice, disallowing the dependency exemption and child tax credit that she and Father claimed on their 2009 tax return. Wife then petitioned the U.S. Tax Court for a ruling on the claimed deficiency.
Now, U.S. Tax Court has ruled in favor of IRS. Tax Court has ruled that (1) per U.S. Internal Revenue Code Section 152(e)(1), child of divorced or separated parents is considered the qualifying child of the custodial parent (defined as the parent who has custody for more of the year); (2) taxpayer is entitled to claim dependency exemption for qualifying child; (3) Father was not custodial parent of Child during 2009; (4) Father could have been considered custodial parent if Mother had signed IRS Form 8332 [release of dependency exemption] or written equivalent releasing dependency exemption to Father; (5) per Income Tax Regulations, Section 1.152-4(e)(1)(ii), effective July 2, 2008, court order, decree or separation agreement may not be used as written equivalent to IRS Form 8332; (6) per Income Tax Regulations Section 1.152-4(e)(5), court order, decree, or separation agreement executed in taxable year beginning on or before July 2, 2008 may qualify as written equivalent of IRS Form 8332 if it contains the information required on that form; and (7) Mother and Father’s agreed entry does not qualify as written equivalent of IRS Form 8332 because it was not signed by them and the release provisions in it were not unconditional. Tax Court holds that Father and Wife were not entitled to claim the dependency exemption or the child tax credit for Child and enters judgment in favor of IRS.