by LAWRENCE D. GORIN
Attorney at Law
Portland, Oregon
(revised 8/99)

To claim an exemption for a dependent, the Internal Revenue Service (IRS) specifies five "tests" that must be met. One of the five tests is the "support test," which states that the taxpayer claiming the exemption must have provided more than half of the dependent's total support for the tax year in question.

However, where the dependent is a child whose parents are divorced or separated, the IRS has a special rule, known as the "Support Test for Divorced or Separated Parents." Under this special rule, the custodial parent is automatically treated (i.e., "deemed") as having provided more than half of the child's total support during the tax year (and is therefore entitled to claim the child as her dependent). It does not matter how much money was paid by the other parent (i.e., non-custodial dad), even if he's the one who actually provided MORE than half the child's total support. (For a chart illustrating just how the "Support Test for Divorced or Separated Parents" works, click here.) The Internal Revenue Code section that is the basis for the special rule for divorced or separated parents is found at 26 USC § 152(e).

Typically (for support orders after 1984), the special IRS rule for divorced or separated parents bars the non-custodial parent from claiming the exemption unless (1) the custodial parent gives her written consent (usually using IRS Form 8332 to do so) or (2) a court decree clearly gives him the unconditional right to claim the dependency exemption (meaning that he has the absolute right to claim the exemption without having to meet any special conditions, such as, for example, being up-to-date in his support payments, etc.).

BUT........ The "Support Test for Divorced or Separated Parents" applies only to parents who were previously married to one another and who are now divorced or legally separated, or who are still married to one another but who lived apart at all times during the last six months of the calendar year.

The "Support Test for Divorced or Separated Parents" does NOT apply to parents who have never been married to one another.

For legal authority, see: DILLARD v. COMMISSIONER., 47 TC Memo 919 n 3 (1984). This case involved a dispute between Dillard (a non-custodial father of a child born out of wedlock) and the IRS as to whether Dillard was entitled to claim his daughter as his dependent under IRC section 152(a). Specifically, the question was whether Dillard's payments for child support, medical expenses, health insurance and life insurance, all for the benefit of the child, amounted to more than half of the child's "total support." The Tax Court concluded that Dillard had in fact provided more than one-half of the total support was therefore entitled to the dependency exemption. The Tax Court recognized that although the child was in the mother's custody, that fact was of no consequence because the father and mother had never been married to one another. As the court noted: "Since [father] and [mother of the child] were never married, the provisions of section 152(e), relating to a child of divorced or separated parents, do not apply."

See also RADIN v. COMMISSIONER, 53 TC Memo 1339 (1987), wherein the tax court again restated the law: "[I]t is clear that section 152(e) applies only to parents who are 'divorced or legal separated under a decree of divorce or separate maintenance, or who are separated under a written separation instrument.' See sec. 1.152-4(a), Income Tax Regs. Consequently, only parents previously united in marriage come within its ambit." (Emphasis supplied.)

Sec. 1.152-4(a) of the Income Tax Regulations (tax regs), states that "the provisions of section 152(e) and this section relate to a determination of which of separated parents (that is, parents who are divorced or legally separated under a decree of divorce or separate maintenance, or separated under a written separation agreement) is to be treated for purposes of section 152(a) and Sec. 1.152-1 as having provided more than half of the support of a child . . . " Note that the definition of "separated parents" does not include parents who have never been married to one another.

In situations involving parents of a child born out of wedlock (where the parents have never been married to one another), the regular support test applies, not the special rule that applies to divorced and [legally] separated parents. In practical terms, this means that if the non-custodial father of a child born out of wedlock provided more than half of the child's total support, he is entitled to claim the child as his exemption, regardless of which parent has custody (and assuming, of course, he meets each of the other four tests for claiming the dependency exemption).

VERY IMPORTANT: The IRS has an interactive web site called TAX TRAILS to help with tax return preparation. In particular, in the section dealing with "Dependents", the program requires you to indicate whether the child who you seek to claim as a dependent is the child of

"divorced parents, or married but separated parents"
OR
"separated parents, who have never been married."

You are asked to make this choice for the following reason: If the situation involves "divorced parents, or married but separated parents," the issue of custody becomes critical, for it is in this situation that the parent having custody will have the right to claim the exemption. On the other hand, if the situation involves "separated parents, who have never been married," the issue of custody is wholly irrelevant. What is critical in this latter situation is simply which parent contributed more than half of the child's total support (regardless of which parent has custody).

Some Practical Hints . . . .

Read the section about Exemptions in IRS Publication 501. It gives a detailed discussion about the five "tests" that must be met in to claim an exemption for a dependent.

The "support test," as discussed in the section on "Exemptions" (in IRS Publication 501), reads as follows: "You must provide more than half of a person's total support during the calendar year to meet the support test. You figure whether you have provided more than half by comparing the amount you contributed to the person's support with the entire amount of support the person received from all sources. This amount includes the person's own funds used for support. You may not include in your contribution any part of your child's support that is paid for by the child with the child's own wages, even if you pay the wages."

"Total Support." To figure if you provided more than half of the support of a person, you must first determine the total support provided for that person. Total support includes amounts spent to provide food, lodging, clothing, education, medical and dental care, recreation, transportation, and similar necessities. In figuring a person's total support, include support provided by the state (welfare, food stamps, housing, etc.).

----> IRS Publication 501 contains a WORKSHEET that you may use to figure out "total support."

If the parent with whom the child resides (let's assume that it is the child's mother) is on welfare, there is a chance that she might not be filing a tax return. If that is the case, and assuming non-custodial father of the child born out of wedlock takes the position that he has provided more than half of the child's total support for the year, his claiming the child as his dependent will probably not be questioned (even if he is in error in believing that he has provided more than half of the child's total support).

In cases where mother does file a tax return and does claim the child as her dependent, the non-custodial father of the child born out of wedlock should nonetheless claim the dependency exemption himself IF he in fact provided more than half of the child's total support for the tax year in question (and meets each of the other four tests for claiming the dependency exemption).

On Form 1040 and 1040A, to the right of the section where you fill in the child's name and social security number, you are asked to state the number of children for whom you claim an exemption who "did not live with you due to divorce or separation." If you were never married to the child's mother, this line does not apply to your situation.

If you have your tax returns prepared by a CPA or other tax professional, be sure to tell him/her that the child is a child born out of wedlock, NOT a child who "didn't live with you due to divorce or separation."

Also, if you previously failed to claim the exemption for a child born out of wedlock who did not live with you because you did not think you could do so as a non-custodial parent, you might want to consider filing an AMENDED return. It may be worth hundreds, if not thousands, of dollars. (Again, this will be easy if the mother did not file a tax return for the year in question. If she did, you will have to argue that you provided more than half of the child's total support.)

CAVEAT and CAUTION:

The foregoing discussion presumes that there is no court order in your particular case that specifically addresses and determines the tax exemption question. If there is, you are advised to check with a lawyer to determine the validity/enforceability of the provision.

###

LAWRENCE D. GORIN
Law Offices of L.D. Gorin
350 American Bank Bldg.
621 S.W. Morrison St.
Portland, Oregon 97205
Phone: (503) 224-8884 (afternoons, Pacific time)
Fax: (503) 274-0818
E-mail: LGOregon@pcez.com
 

Cited 47 TCM
Alfonso Lorenza Dillard

[CCH Dec. 40 934(M)] Alfonro Lorenza Dillard v. Commissioner.

Docket No. 5158-o3. T. C. Memo. 1984-2S. Filed January 11 1984. [Appealable barring stipulation to the contrary, to CA-3,--CCH.]

[Code Secs. 1. 2, 151 and 152]

Exemptions: Dependency: Provision of more the one-half of child support: Child residing with other parent: Returns: Filing status: Head of household.--A father who provided more than one-half of his daughter's support was entitled to a dependency exemption for her for each of the tax years at issue. However since the daughter resided with her mother, the father did not qualify as a "head of household".--CCH.

Alfonso Lorenza Dillard, pro se. Joseph C. Hollywood for the respondent.

Memorandum Finding of Fact and Opinion

PATE, Special Trial Judge: This case was assigned to and heard by Special Trial Judge Joan Seitz Pate pursuant to the provisions of section 7456(c) and (d)*fn1, General Order No. 8 (81 T. C. V) (July 1983), and Rules 180 and 181 Tax Court Rules of Practice and Procedure.*fn2

Respondent determined the following deficiencies in petitioner's Federal income tax returns:
 

 
The issues for decision in this case are: (1) whether the petitioner is entitled to a dependency exemption for his daughter for the years 1978, 1979, and 1980 and (2) whether petitioner may file as a "head of household" for each of those years.

Petitioner's daughter Takiyah was born on May 5, 1976. She has resided with her mother, Mary McDonald ever since her birth. Pursuant to series of orders issued by the family court of the State of Delaware Newcastle County petitioner paid Mary McDonald weekly sums for the support of their daughter. Such sums totaled $l,885 for the year 1978; $2,275 for 1979; and $2,444 for 1980.

Takiyah was covered under petitioner's group Blue Cross Blue Shield insurance. Although most of the insurance premium was paid by his employer in order to obtain the additional coverage necessary for his daughter petitioner authorized deductions from his wages. The deductions totaled $86 for the year 1978, $89 for the year 1979, and $87 for the year 1980.

In addition, evidence was submitted that petitioner incurred some medical expenses on behalf of his daughter including the expense of transporting his daughter from her home to the doctor's office. Petitioner also testified that be provided life insurance for Takiyah's benefit. Since petitioner did not recall the exact amounts of these expenditures we conclude based on the record herein that they amounted to a minimum of $100 per year. Consequently, the court finds that the total amount of support provided by petitioner for his daughter totaled $2,071 for 1978, $2,464 for 1979, and $2,631 for 1980.

Section 151(e) allows an exemption for each "dependent" as defined in section 152. Section 152(a)(1) includes within its definition of dependent a daughter if the taxpayer provides over one-half of her support. In order to show that petitioner contributed over one-half of his daughter's support he has the burden of proving not only what amount he contributed toward her support but also the amount spent for her total support.*fn3 Maxwell v. Commissioner [Dec. 31,229], 57 T. C. 539 540 (1972); Vance V. Commissioner [Dec. 24,905] 36 T. C. 547, 549 (1961).

At trial Mrs. McDonald's testimony included her opinion as to the fair rental value of her home an estimate as to the amounts paid for utilities, food and various other expenses of her household. During the years in issue her household was occupied by three persons, Mrs. McDonald her son and Takiyah. Therefore one-third of these expenses would be attributable to Takiyah's support.

In addition Mrs. McDonald testified as to amounts she paid for Takiyah's care while she worked. Conflicting evidence was submitted by petitioner with regard to these expenditures.

In order for petitioner's contribution to amount to more than half of Takiyah's support the court must find that Takiyah's total support was something less than $4,142.00 for the year 1978, something less than $4,928.00 for the year 1979, and something less than $5,262.00 for the year 1980. Based on examination of the entire record and taking into consideration the credibility of the witnesses the court does so find. Therefore, we hold that petitioner did provide more than one-half the support of his daughter for the years 1978, 1979, and 1980 and accordingly is entitled to an exemption for his dependent daughter for each of those years.

Section l(b) provides special tax rates for persons qualifying as "heads of households." Section 2(b)(1) provides that an individual shall be considered a head of household if he is not married at the close of the taxable year and maintains as his home a household which constitutes the principal place of abode of a qualifying individual as a member of such household. Section 1.2-2(b)(1) Income Tax Regs. A daughter is a qualifying individual. Section 1.2-2(b)(3)(i) Income Tax Regs. However the household must actually constitute the home of the petitioner and such home must also constitute the principal place of abode of Takiyah. Section 1.2-2(c)(i); Manning v. Commissioner [Dec. 36,232], 72 T. C. 838 (1979); Grace v. Commissioner [Dec. 29,430], 51 T. C. 685 (1969). Since the evidence is uncontradicted that Takiyah resided with her mother during the years in issue we hold that petitioner does not qualify as a "head of household" for the years 1978 1979 and 1980.

Decision will be entered under Rule 155.

---

[CCH Dec. 40,936(M)] Henry G. Ross v. Commissioner, Sandra Ross v. Commissioner.

Docket Nos. 10127-82, 10144-82. T. C. Memo. 1984-27, Filed January 12, 1984. [Appealable, barring stipulation to the contrary to CA-5.--CCH.] 

---

*fn1 All section references are to the Internal Revenue Code of 1954, as amended, unless otherwise indicated.

*fn2 Pursuant to the order of assignment and an the authority of the "otherwise provided" language of Rule 182 Tax Court Rules of Practice and Procedure, the post-trial procedures set forth in that rule are not applicable in this case.

*fn3 Since petitioner and Mary McDonald we never married, the provisions of section 152(e), relating to a child of divorced or separated parents, do not apply. Cf. Finch v. Commissioner [Dec. 37,897(M)], T. C Memo. 1981-233