Qualifying Children and Tax Exemptions

Cook v. Comm’r, T.C. Memo. 201948, 2019 WL 2011087 (2019)

(a) Facts: An unmarried couple had a child. A New York court awarded custody to the mother. The order was silent on the tax exemption for the child. The parties orally agreed that the father could claim the exemption.

The father took the exemption. The IRS disallowed the exemption and assessed a deficiency. The husband appealed to the Tax Court.

(b) Issue: Was the husband entitled to claim the exemption?

(c) Answer to Issue: Clearly not.

(d) Summary of Rationale:The child was not a qualifying child of the father because the child did not live with the father for more than half of the year. “Despite the oral agreement between petitioner and Mrs. Taylor and petitioner’s related assertions, the statute is clear that, because petitioner is C.D.C.’s noncustodial parent, C.D.C. cannot be his qualifying child.” 2019 WL 2011087, at *2.

The child could not be the father’s qualifying relative because the child was the mother’s qualifying child.

The mother could have transferred the exemption to the father, but only if she gave the father Form 8332 or its substantial equivalent and he attached the form to his return. The mother did not give the father the form. The father argued that the mother had no income and could not use the exemption, but that is not the test; the test is whether Form 8332 was filled out and filed. Plainly, it was not.

Observations:

1. The only way to transfer the exemption is Form 8332 or its substantial equivalent. The oral agreement of the parties was not a sufficient substitute.

2. Cook was not a difficult case, and it is hard to see how the taxpayer could reasonably have hoped to prevail.