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Father Was Custodial Parent Despite Conciliation Agreement's Terms.
(Parker Tax Publishing April 28, 2014)

Because a son lived with his father for a longer period of time during each year in issue than he did with his mother, the child's father was entitled to claim the dependency exemption deduction, the credit for child and dependent care expenses, the child tax credit, and the earned income credit for the child. Harris v. Comm'r, T.C. Memo. 2014-69 (4/16/14).

Rodney Harris and Alvanisha McFall, who never married and lived apart from each other, were parents to a minor child. The couple entered into a conciliation agreement in 2003 in which they agreed to share joint custody of their son. The agreement did not award the dependency exemption to either parent; however, it did set out detailed guidelines as to how the child's time should be split between the parents throughout the year. The conciliation agreement suggested, by its terms, that Alvanisha should be treated as the custodial parent, as the child was to spend the greater part of the calendar year with her. In 2010 and 2011, the child was in school and active in sports. Alvanisha, who was unemployed, did not own a car or have a driver's license. Rodney played a significant role in the child's life, driving his son to sports practice and serving as a coach of his basketball team. The child also spent school vacations and went to church with Rodney. On their separate 2010 and 2011 tax returns, Rodney and Alvanisha each claimed dependency exemption deductions for their son. The IRS disallowed Rodney's dependency exemption deduction, credit for child and dependent care expenses, child tax credit, and earned income credit.

Code Sec. 151 allows an exemption for each dependent of the taxpayer. Code Sec. 152 defines "dependent" to include that taxpayer's child who does not provide more than half of his or her own support and who has the same principal place of abode as the taxpayer for more than one-half of the calendar year (i.e., a "qualifying child"). If a child's parents do not file a joint return, that child is treated as the qualifying child of the parent with whom the child lived for the longer period of time during the tax year (i.e., the custodial parent). Under Reg. 1.152-4(d), the custodial parent is the parent with whom the child lives the greater number of nights during the calendar year. However, the noncustodial parent may claim the dependency exemption deduction for a child if the custodial parent executes a written declaration releasing the custodial parent's claim to the deduction and the noncustodial parent attaches that written declaration to the noncustodial parent's return for that tax year.

Rodney claimed that he was entitled to the dependency deduction for his son not on the basis of a written declaration, but because he was the custodial parent of his son. The IRS contended that the conciliation indicated that Alvanisha should have custody of the child for a greater part of the year.

The Tax Court found that Rodney was the custodial parent, and his son was a qualifying child of his for 2010 and 2011. Although the conciliation agreement suggested that Alvanisha should be treated as the custodial parent, the agreement did not reflect the time the child actually spent with each of his parents in 2010 and 2011. In determining whether the child was a qualifying child of Rodney, the court noted that Rodney's credible testimony showed that he played a significant role in his son's life. He demonstrated that, due to the child's involvement with sports, the child slept at either Rodney's or Rodney's relative's home a greater number of nights than he did at his mother's home during 2010 and 2011. Thus, Rodney was entitled to the dependency exemption deduction for those years.

For a discussion of exemptions for dependents, see Parker Tax ΒΆ10,720. (Staff Editor Parker Tax Publishing)

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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.

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