Form 8332 Is Required Per Courts

Need for Form 8332 Reiterated by Tax Court

Facts: The taxpayer is the noncustodial parent. The child lives with the custodial parent. A divorce decree or support order grants the taxpayer the right to claim the child as a dependent for income tax purposes. The applicable taxpayer claims the child based on the decree or order and does not attach a Form 8332, Release of Claim to Exemption for Child of Divorced or Separated Parents or similar statement. (The regulations require a Form 8332 or similar statement to be attached to the taxpayer’s return in order for the noncustodial parent to claim the dependency exemption.)

Results: In the TC Summary cases cited below the IRS denied the dependency exemption due to the lack of a Form 8332 or similar statement. Tax Court has agreed with the IRS and denied the exemptions in all of these cases except the last one. Reminder – TC Summary cases cannot be cited as a precedent for taking a position.

Earl Clyde Muncy, TC Summary 2005-20 – Decree gave Mr. Muncy the right to claim the children. No conditions were mentioned in the case write-up. DENIED FOR LACK OF 8332

Walter Mace, TC Summary 2005-89 – Mr. Mace never married the child’s mother. Court order gave him exemption if he was current in his support payments. He was current in support. The child’s mother also had claimed the child and was ordered by the state court to amend her tax return, although Tax Court does not know if she did such. DENIED FOR LACK OF 8332

Lawrence Patrick O’Brien, TC Summary 2005-111 – Decree gave Mr. O’Brien the dependency exemptions as long as he was current in child support. He was current. DENIED FOR LACK OF 8332

James M Melton, TC Summary 2005-152 – Condition in divorce decree says he can claim the children “as long as his support payments entitle him to such under IRS guidelines.” His ex-wife didn’t sign the decree. DENIED FOR LACK OF 8332

Michael T. Schultheiss, TC Summary 2005-169 – Decree gave Mr. Schultheiss the tax deductions for the children as long as his ex-wife would not benefit from claiming them. In denying the exemptions, Tax Court also stated “We need not and do not consider the contingency described in the divorce decree.” DENIED FOR LACK OF 8332

Steven F Darton, TC Summary 2005-188 – The decree stated Mr. Darton could “purchase” the exemption rights for one or more of his children from his ex-wife. Mr. Darton purchased one for the year in question. His ex-wife also claimed the child. DENIED FOR LACK OF 8332

David B D’Amours, TC Summary 2006-26 – The ex-wife signed a Marital Separate Agreement which was incorporated into the decree. A provision in the divorce decree says his ex-wife “shall execute all documents which the Husband deems necessary to enable him to so claim the children.” DENIED FOR LACK OF 8332

Clifford Ray Wood, TC Summary 2006-46 – Decree was silent but taxpayer claimed he paid over 80% of the child’s support. DENIED FOR LACK OF 8332

As one judge put it, “Although the support order provides that petitioner is entitled to the dependency exemption deduction, it cannot by its own terms determine issues of Federal tax law. Petitioners’ remedy is to continue to pursue the custodial parent’s compliance with the support order in the State court, and any and all other remedies that may be pursued against the custodial parent to make petitioners whole.” Basically the decree is not a tax issue, but a civil matter and is not binding on the IRS.

ONE CASE IN POSSIBLE OPPOSITE DIRECTION – In our readings of Tax Court cases for the past year, we only ran across many more cases where Tax Court required the Form 8332 and only one case were Form 8332 was not required. Brooks Edward Omans, TC Summary 2005-110 – Divorce decree was signed three times by the ex-wife including once in front of a notary. Decree gives Mr. Omans the dependency exemptions as long as he was current in child support. He was current. Both Mr. Omans and his ex-wife claimed the children. The IRS Appeals officer asked Mr. Omans for Form 8332. He obtained one signed by his ex-wife. She signed for many years including the year in question. When the Appeals officer asked her to remove the exemptions from her return, she declined and wrote to the Appeals officer that she had signed the Form 8332 under duress. Tax Court ruled Mr. Omans could claim the children and states that IRS’ “insistence on the presence of Form 8332 or the language ‘agree not to claim’ or ‘will not claim’ in this case was overly formalistic …”

Eight (and many more) cases requiring use of Form 8332 and one against. Tax professionals that claim dependency exemptions for noncustodial parents without having Form 8332 could be setting themselves up for preparer penalties for not following the regulations. Of course attorneys could be setting themselves up when they write divorce decrees that assign the dependency exemptions without using wording substantially the same as Form 8332.

All of these cases can be found at www.ustaxcourt.gov by clicking on OPINIONS SEARCH and entering the taxpayer’s last name in the Case Name Keyword box.

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This text has been shared with you courtesy of: David & Mary Mellem, EAs & Ashwaubenon Tax Professionals, 920-496-1065 (fax 920-496-9111) [email protected], [email protected], [email protected], and [email protected].

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