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Posted by Alan on January 28, 2008, 8:59 pm
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Condor wrote:
>> In fact, this change in the rules also may affect
> children of divorced, separated or never married parents. Any
> parent who is the custodial parent (parent who has physical
> custody of the child for the greater part of the year) and does
> not have a filing requirement and does not file a tax return to
> obtain a tax benefit is no longer a taxpayer and does not have a
> qualifying child.
>
> I agree that Notice 2008-05 leaves important questions unanswered but I
> don't think the law supports your conclusions.
>
> The thrust of Not. 2008-05 is solely to clarify that an individual will not
> fail to meet the definition of a qualifying relative because of an overly
> inclusive interpretation of the language in IRC § 152(d)(1)(D) which reads
> in relevant part "is not a qualifying child...of any other taxpayer." In
> fact, this is precisly what Not. 2008-05 says on pages 3 - 4:
>
> "The Service, therefore, concludes that a taxpayer otherwise eligible to
> claim a dependency exemption deduction for an unrelated child is not
> prohibited by section 152(d)(1)(D)
> from claiming the deduction if the child's parent (or other person with
> respect to whom the child is defined as a qualifying child) is not required
> by section 6012 to file an income tax return and (i) does not file an income
> tax return, or (ii) files an income tax return solely to obtain a refund of
> withheld income taxes."
>
> Nothing in Not. 2008-05 alters the statutory requirement that a qualifying
> relative must satisfy all 4 conditions listed in §§ 152(d)(1)(A) - (D). The
> notice makes it clear that the construction of subsection (D) is the only
> issue being addressed.
>
> The special rule for divorced/separated parents is covered in § 152(e),
> which starts out with "Notwithstanding subsection (c)(1)(B), (c)(4), or
> (d)(1)(C), if."
>
> Subsection (d)(1)(C) reads:
>
> "(C) with respect to whom the taxpayer provides over one-half of the
> individual's support for the calendar year in which such taxable year
> begins, and"
>
> A child cannot meet the definition of a qualifying relative, which includes
> meeting all 4 conditions listed under § 152(d)(1), when subsection (C) is
> trumped by § 152(e), as the language of that section plainly makes clear.
> Thus if a child fails to meet the qualifying relative tests, § 152(d)
> doesn't apply, making subsection (d)(1)(D) necessarily moot. Nothing in
> Not. 2008-05 supports the fast and loose interpretation that the
> non-custodial parent is eligible to claim his or her child's dependency
> exemption without a signed Form 8332 from the custodial parent because that
> parent does not file (and is not required to file) a tax return.
>
>
> Condor
>
From the Notice:
==============================================================
APPLICATION
For purposes of section 152(d)(1)(D), an individual is not a
qualifying child of “any other taxpayer” if the individual’s
parent (or other person with respect to whom the individual is
defined as a qualifying child) is not required by section 6012 to
file an income tax return and (i) does not file an income tax
return, or (ii) files an income tax return solely to obtain a
refund of withheld income taxes.
==============================================================
Very explicit especially if you read Sec. 152(d)(1)(D). In
addition, they can't use the rationale they used just for
unrelated children. The rationale only holds up when it is
applied exactly as they state it should be applied.
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