Never Married Non-custodial Parent ... Allowed Dependency Exemption

Mr. Lopez and Ms. King have never been married to each other but they are the biological parents of Monique who was born in 1986.  In 1988, Ms. King signed a Form 8332, Release of Claim to Exemption for Child of Divorced or Separated Parents, in favor of Mr. Lopez, for taxable year 1987 and all future years thereafter.  Mr. Lopez claimed dependency exemptions for Monique for 1987 through 1999 and attached From 8332 to the return each year.

Beginning in 1993, Ms. King decided to also claim Monique each year as a dependent because Monique lived with her at all times, including the years in issue.  Since both parents claimed Monique as a dependent, the IRS disallowed both dependent exemptions for the tax years of 1998 and 1999.  The prior years were not at issue in this action since they were closed years.

The key question raised by Ms. King and the IRS addresses the application of the special support tests of §152(e) to parents that have never been married.  If it does not apply, Ms. King contended that the Form 8332 would not be valid.

The courts concluded that the legislative history of §152(e) did not clearly prevent the application of the special support test to parents who have never been married to each other.  Applying §152(e)(1)(A)(iii) to both parents who have been married to each other and those who have not been married to each other was consistent in resolving dependency disputes.

Therefore, in this case the special support test was applied.  Ms. King was treated as providing over half of Monique's support for 1998 and 1999.  As such she would be entitled to the dependency deduction unless she released her claim to the exemption for those years.  Since the court found no reason to ignore the intent of the signed Form 8332, Mr. Lopez, as the non-custodial parent was given the right to claim Monique as a dependent.

Lopez vs. King 121TC No. 12

NOTE:  In December 2000, the instructions to Form 8332 were revised to include cautionary language stating that the special support test "does not apply to parents who never married each other."  It would appear that because of this conflict between the IRS and the courts, we may not have seen the last of this issue.