tax research software IRS Guidance
Parker Pro Tax Library
Professional Tax Software Parker Tax Pro Library
tax and accounting
Professional Tax Research Software
Parker Tax Pro Library
Tax Research Articles Tax Research Parker's Tax Research Articles Accounting Research CPA Client Letters Tax Research Software Client Testimonials Tax Research Software tax research


Federal Tax Research


Tax Court Weighs In on Ex-Spouse Battles Over Dependency Exemption
(Parker's Federal Tax Bulletin: January 7, 2013)

Often in a divorce, one parent gets custody of the children while the noncustodial parent pays child support, with the divorce court sometimes stipulating that the noncustodial parent gets a dependency exemption for the children involved. However, Code Sec. 152(e)(2)(A) provides that a noncustodial parent is not entitled to the dependency exemption unless, among other requirements, the custodial spouse signs Form 8332. Many noncustodial parents have tried to claim that a state court order allowing them a dependency exemption gives them the right to the exemption.

Late last month, two cases involving dependency exemption fights between ex-spouses reached the Tax Court. In Armstrong v. Comm'r, 139 T.C. 18 (12/19/12), the noncustodial parent argued that a state court order signed by the custodial parent agreeing to release the dependency exemption was enough to allow him the exemption. In George v. Comm'r, 139 T.C. 19 (12/19/12), a custodial parent claimed that the Form 8332 she was ordered to sign by the divorce court was invalid because the court failed to consider that her ex-spouse was in arrears in his child support payments. Thus, she claimed, she was entitled to the dependency exemption. In both cases, the taxpayers lost.

Dependency Exemption Rules

Under Code Sec. 151(c), an individual is allowed a deduction for exemption for each individual who is a dependent of the taxpayer for the tax year. Code Sec. 152(a) defines the term dependent to include a qualifying child. Generally, under Code Sec. 152(c)(1), a qualifying child must:

(1) bear a specified relationship to the taxpayer (e.g., be a child of the taxpayer);

(2) have the same principal home as the taxpayer for more than one-half of the tax year at issue;

(3) meet certain age requirements; and

(4) not have provided over one-half of such individual's support for the tax year at issue.

However, in the case of divorced parents, special rules determine which parent may claim a dependency exemption deduction for a child. Under Code Sec. 152(e), when certain criteria are met, a child may be treated as a qualifying child of the noncustodial parent rather than of the custodial parent. A child can be the qualifying child of a noncustodial parent under Code Sec. 152(e)(1) and (2), if:

(1) the child receives over one-half of the child's support during the calendar year from the child's parents who are divorced under a decree of divorce;

(2) the child was in the custody of one or both of the child's parents for more than one-half of the calendar year;

(3) the custodial parent signs a written declaration (in such a manner and form as IRS regulations prescribe) that such custodial parent will not claim such child as a dependent for any tax year beginning in such calendar year; and

(4) the noncustodial parent attaches the written declaration to his or her tax return for the appropriate tax year.

The IRS's Form 8332, Release of Claim to Exemption for Child of Divorced or Separated Parents, provides an effective and uniform way for a custodial parent to make the declaration required in (3) above. For tax years starting before July 3, 2008, Reg. Sec. 1.152-4T, Q&A-3, provides that a noncustodial parent can also rely on an alternative document, provided that it conforms to the substance of Form 8332. In particular, for such tax years, a court order that has been signed by the custodial parent may satisfy Code Sec. 152(e)(2)(A) as the noncustodial parent's declaration if the document conforms to the substance of Form 8332.

However, this regulation was amended and, for tax years beginning after July 2, 2008, a court order signed by the custodial parent does not satisfy Reg. Sec. 1.152-4(e)(1)(ii). The regulations now provide that a written declaration not on the form designated by the IRS (i.e., Form 8332) must conform to the substance of that form and must be a document executed for the sole purpose of serving as a written declaration under Code Sec. 152. A court order or decree or a separation agreement, the regulation states, cannot serve as a written declaration.

Armstrong Decision

Billy Armstrong was divorced, and his ex-wife, Ms. Delaney, had custody of their son. In 2003, an arbitration award and a state court order provided that Billy was entitled to a dependency exemption for his son. A March 2007 state court order provided the same and explicitly required Billy's ex-wife to execute in his favor a Form 8332 on the condition that Billy pay child support for his son. Billy paid the full amount of child support throughout 2007, but Ms. Delaney failed to provide the executed Form 8332. Billy remarried and claimed a dependency exemption and child tax credit for his son on a jointly filed return. He attached the May 2003 arbitration award. During an audit of that return, Billy also provided the IRS with the 2003 and 2007 child support orders, the latter signed by Billy's ex-wife.

The IRS rejected the Armstrongs' claim for a dependency exemption deduction and a child tax credit for Billy's son because the award and orders were conditional upon Billy staying current with his support obligations. The IRS also assessed an accuracy-related penalty. Billy took his case to the Tax Court.

The Tax Court began its analysis by assuming that Ms. Delaney's signature on the March 2007 court order constituted, in effect, her declaration that she would comply with the order. Therefore, the critical question before the court was whether, by declaring that she would comply with the March 2007 order, Ms. Delaney was also declaring that she would not claim her son as a dependent in 2007.

That March 2007 order, the court noted, did not provide unconditionally that Ms. Delaney would not claim a dependency exemption deduction for her son or that she had to sign Form 8332. Rather, the order unambiguously stated that her obligation to sign the release--and Billy's right to the exemption--was conditional upon Billy's payment of child support. By signing the order, the court stated, Ms. Delaney effectively declared circumstances under which she would not release her claim but would instead report herself to be entitled to the dependency exemption.

The court was quite sympathetic to Billy's situation. He was up to date on his child support; and under the state court order, Ms. Delaney was obliged to sign Form 8332 and release the exemption deduction to him. However, the court noted that it was obligated to follow the statute as written, whether the resulting disadvantage is suffered by a noncustodial parent who bore the burden of child support but did not receive an executed Form 8332, or whether the disadvantage is suffered by a custodial parent who executed a Form 8332 but then bore an undue and unintended burden of child support.

According to the court, in signing and assenting to the order, Ms. Delaney did not declare that she would not claim such child as a dependent. Instead, she declared that she would not claim her son as a dependent if Billy kept current with support payments; but she also thereby unambiguously declared that if he did not keep current, then she would claim their son as a dependent. According to the court, this made her declaration quite different from a declaration required by Code Sec. 152 that she would not claim the child as a dependent for the year at issue.

The court noted that, although the state court order was conditional, Billy fulfilled the condition. He did keep current with his support obligations, so that under the terms of the order, he was entitled to the exemption deduction and Ms. Delaney was obliged to execute the release. But, the Tax Court stated that the question was not what Billy was entitled to under the state court order but what he was entitled to under Code Sec. 152(e). The Tax Court concluded that, under Code Sec. 152(e), Billy's son was not his qualifying child in 2007, and Billy was not entitled to the dependency exemption or child tax credit for that year.

However, the court also concluded that Billy was not responsible for the accuracy-related penalty. To be liable for the penalty, the court noted, the IRS had to prove that Billy was negligent. The court did not believe that Billy, a truck driver, was sufficiently experienced in tax accounting and law such that he would realize that entitlement under the state court order to Ms. Delaney's release of the dependency exemption did not necessarily mean entitlement to that deduction under Code Sec. 152(e). In addition, the state court order and Billy's compliance with it constituted reasonable cause to someone in his circumstance, and nothing in the record of the case, the Tax Court stated, suggested anything other than that Billy acted in good faith.

George Decision

In 1995, Rachael George and Johnson John were divorced in Maryland. Rachael got custody of their two children and Mr. John was ordered to pay child support. The divorce judgment did not expressly provide how or whether the dependent status of the children would be allocated between Mr. John and Rachael for tax purposes after the divorce. In December 1995, Rachael and her children moved to northern Virginia. By February 1996, Mr. John stopped fulfilling his support obligations and, as a result, Rachael initiated a child support action against him in Virginia. In October 1996, the Maryland court ordered that Mr. John could claim one of his children as an exemption for Federal and State income tax purposes, each year, commencing with 1996 taxes, provided that all support payments are current. Even though Rachael argued that Mr. John was in arrears on child care payments, she nonetheless complied with the court order. At the direction of the court, she signed in the courtroom on February 3, 1997, a Form 8332, thereby releasing her right to claim an exemption for the child for 1996. Rachael subsequently moved to dismiss the case from the Maryland court for lack of personal jurisdiction, since Mr. John had moved to Connecticut and Rachael and the children lived in Virginia. In May of 1997, the Maryland court dismissed the case.

In January 2007, a Virginia court ordered that Rachael execute Form 8332 releasing any tax exemption claim for one of the children for tax years 1996 to 2010 and amended Mr. John's child support obligation by releasing his obligation to support the other child. Mr. John was delinquent on his child support obligation at that time and continued to be in arrears thereafter.

Nonetheless, in January 2007, under court order and under threat of contempt, Rachael executed another Form 8332 relinquishing her claim to exemption for one of the children for the tax years 1996 to 2010. The form stated: I agree not to claim an exemption for the child. Rachael continued to battle the state court order.

Because Rachael believed the state court order to be improper, she claimed a dependency exemption and child tax credit for the child that was the subject of the Form 8332 on her returns for each of 2007 and 2008. Mr. John also claimed the same child as a dependent for those years and attached the executed Form 8332 to his tax returns. The IRS issued a deficiency notice to Rachael, finding that she was not entitled to a dependency exemption.

Before the Tax Court, Rachael argued that her Form 8332 should be disregarded for three related reasons--i.e., because she signed it under duress, because the order requiring her to sign it was erroneous, and because her former husband did not provide the child support that the court order required and presumed.

According to the Tax Court, the threat of judicial contempt if Rachael did not comply and sign Form 8332 cannot be considered duress that might make her signing void. Duress, the court noted, occurs when an unlawful act induces action. In Rachael's case, the court stated, it was Virginia law that required her to comply with the Virginia court's order. Thus, Rachael's obligation under the law to execute the Form 8332 was not duress, and the compulsion she felt provided no basis for invalidating her release on Form 8332.

The court declined to examine the propriety of the state court order that required Rachael to execute the Form 8332. Such an endeavor, the court stated, would undertake the administrative burden that the rule in Code Sec. 152(e) was designed to alleviate.

The court then addressed Rachael's contention that Mr. John was in arrears on his child support obligations. According to the court, even if this was true, it does not affect the validity of her Form 8332 under Code Sec. 152(e) once the form is executed. The only support requirement applicable to Mr. John's claim of the dependency exemption, the court stated, was one not disputed--i.e., the requirement in Code Sec. 152(e)(1)(A) that a child receives over one-half of the child's support during the calendar year from the child's parents. Code Sec. 152(e)(1)(A), the court noted, does not specify which of the child's parents must have provided that support. The statute thus does not require that a noncustodial parent who has the custodial parent's release on Form 8332 must also prove that he, and not the custodial parent, supported the child. Rather, the court stated, an obvious purpose of Code Sec. 152(e) is, where a release is executed, to eliminate any contest as to which parent provided how much support.


There are two lessons to be learned from the above cases. Where a noncustodial parent wants to claim a dependency exemption, that parent should require a signed Form 8332 as part of the final divorce agreement. Where a custodial parent has signed a Form 8332 but the noncustodial spouse is not living up to his or her end of the agreement, the custodial spouse can revoke the Form 8332 or written declaration giving the noncustodial spouse the exemption. Reg. Sec. 1.152-4(e)(3) provides that the revocation can be made on Form 8332, whether or not the written declaration was made on that form. A revocation not on that form must conform to the substance of the form and must be a document executed for the sole purpose of serving as a revocation. The revocation must specify the year or years for which the revocation is effective. The parent revoking the written declaration must make reasonable efforts to provide actual notice to the other parent and should keep documentation to that effect.

(Staff Editor at Parker Tax Publishing)

Disclaimer: This publication does not, and is not intended to, provide legal, tax or accounting advice, and readers should consult their tax advisors concerning the application of tax laws to their particular situations. This analysis is not tax advice and is not intended or written to be used, and cannot be used, for purposes of avoiding tax penalties that may be imposed on any taxpayer. The information contained herein is general in nature and based on authorities that are subject to change. Parker Tax Publishing guarantees neither the accuracy nor completeness of any information and is not responsible for any errors or omissions, or for results obtained by others as a result of reliance upon such information. Parker Tax Publishing assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect information contained herein.

Parker Tax Pro Library - An Affordable Professional Tax Research Solution.

Professional tax research

We hope you find our professional tax research articles comprehensive and informative. Parker Tax Pro Library gives you unlimited online access all of our past Biweekly Tax Bulletins, 22 volumes of expert analysis, 250 Client Letters, Bob Jennings Practice Aids, time saving election statements and our comprehensive, fully updated primary source library.

Parker Tax Research

Try Our Easy, Powerful Search Engine

A Professional Tax Research Solution that gives you instant access to 22 volumes of expert analysis and 185,000 authoritative source documents. But having access won’t help if you can’t quickly and easily find the materials that answer your questions. That’s where Parker’s search engine – and it’s uncanny knack for finding the right documents – comes into play

Things that take half a dozen steps in other products take two steps in ours. Search results come up instantly and browsing them is a cinch. So is linking from Parker’s analysis to practice aids and cited primary source documents. Parker’s powerful, user-friendly search engine ensures that you quickly find what you need every time you visit Our Tax Research Library.

Parker Tax Research Library

Dear Tax Professional,

My name is James Levey, and a few years back I founded a company named Kleinrock Publishing. I started Kleinrock out of frustration with the prohibitively high prices and difficult search engines of BNA, CCH, and RIA tax research products ... kind of reminiscent of the situation practitioners face today.

Now that Kleinrock has disappeared into CCH, prices are soaring again and ease-of-use has fallen by the wayside. The needs of smaller firms and sole practitioners are simply not being met.

To address the problem, I’ve partnered with a group of highly talented tax writers to create Parker Tax Publishing ... a company dedicated to the idea that comprehensive, authoritative tax information service can be both easy-to-use and highly affordable.

Our product, the Parker Tax Pro Library, is breathtaking in its scope. Check out the contents listing to the left to get a sense of all the valuable material you'll have access to when you subscribe.

Or better yet, take a minute to sign yourself up for a free trial, so you can experience first-hand just how easy it is to get results with the Pro Library!


James Levey

Parker Tax Pro Library - An Affordable Professional Tax Research Solution.

    ®2012-2017 Parker Tax Publishing. Use of content subject to Website Terms and Conditions.

IRS Codes and Regs
Tax Court Cases IRS guidance