Lisa Beamon Swint v. Commissioner ( 2014 )

142 T.C. No. 6UNITED STATES TAX COURT
LISA BEAMON SWINT, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 11770-12. Filed February 24, 2014.
Prior to marrying P, P’s husband had a child with TDW. An
agreed entry filed by a State court in February 1998 provided that P’s
husband would be entitled to a dependency exemption deduction and
a child tax credit for the child if he was current in his child support
obligations. The agreed entry was not signed by P’s husband or
TDW. P and her husband filed a joint Federal income tax return for
the taxable year 2009 claiming a dependency exemption deduction
and a child tax credit. R disallowed P’s claim for a dependency
exemption deduction and a child tax credit.
Held: Sec. 1.152-4(e)(1)(ii), Income Tax Regs., provides that
for taxable years starting after July 2, 2008, a “court order or decree
or a separation agreement may not serve as a written declaration.”
However, sec. 1.152-4(e)(5), Income Tax Regs., provides a carveout
to this rule: If a written declaration was executed in a taxable year
beginning on or before July 2, 2008, we look to the requirements for
the form of a written declaration that were in effect at the time the
written declaration was executed. At the time the agreed entry was
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filed in 1998 there was no prohibition on using a court order or
decree or a separation agreement as a written declaration if the other
requirements for a written declaration were met.
Held, further, the agreed entry did not satisfy the requirements
for the form of a written declaration in effect at the time the agreed
entry was executed because it was not signed by the custodial parent
and was not unconditional. Therefore, P is not entitled to a
dependency exemption deduction or a child tax credit for the child.
Ljubomir Nacev, for petitioner.1
Robert D. Kaiser and Edward Lee Walter, for respondent.
RUWE, Judge: Respondent determined a deficiency in petitioner’s Federal
income tax of $1,547 for the taxable year 2009 (year at issue). The issues for
decision are: (1) whether petitioner is entitled to a dependency exemption
deduction under section 151(a)2 and (c); and (2) whether petitioner is entitled to a
child tax credit under section 24(a).
1
Mr. Nacev entered his appearance after the trial and filed a posttrial
memorandum brief on petitioner’s behalf.
2
Unless otherwise indicated, all section references are to the Internal
Revenue Code in effect for the year at issue, and all Rule references are to the Tax
Court Rules of Practice and Procedure.
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FINDINGS OF FACT
Some of the facts have been stipulated and are so found. The stipulation of
facts and the attached exhibits are incorporated herein by this reference.
At the time the petition was filed, petitioner resided in Ohio.
Petitioner married Tommy L. Swint in 2000. Mr. Swint passed away in
2010. From 2000 through 2010 petitioner and Mr. Swint filed joint Federal
income tax returns.
Before marrying petitioner, Mr. Swint had a child (minor child)3 that was
born in 1997 with Tonia Dawn Wilson. An agreed entry between Mr. Swint and
Ms. Wilson was filed on February 13, 1998, by the Common Pleas Court of
Montgomery County, Ohio, Juvenile Division. The parties submitted into
evidence two pages of the agreed entry. In regard to the dependency exemption
deduction the agreed entry stated:
[Mr. Swint] shall be entitled to claim the minor child as a
dependency exemption as long as he is current in his child support
obligations for all applicable federal, state and local tax purposes.
Failure to keep current with his support obligations will result in a
forfeiture of any rights under this paragraph until such time as * * *
[Mr. Swint] has eliminated all arrearages and is again fully current in
his child support obligations. Delinquency in child support will cause
the income tax deduction to be transferred to * * * [Ms. Wilson] until
the arrearage is paid and all payments are current. The parties agree
3
The names of minor children are redacted. See Rule 27(a)(3).
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to cooperate with the execution of any and all documents necessary to
allow the claiming of these exemptions.
The pages of the agreed entry submitted into evidence were not signed by either
Mr. Swint or Ms. Wilson.
Petitioner and Mr. Swint timely filed a joint Federal income tax return for
the year at issue claiming a dependency exemption deduction and a child tax credit
for the minor child. The minor child did not live with petitioner and Mr. Swint
during the year at issue.
On February 6, 2012, respondent issued to petitioner a notice of deficiency
for 2009. The notice of deficiency disallowed the dependency exemption
deduction and the child tax credit for the minor child. Petitioner timely filed a
petition disputing the determinations in the notice of deficiency.
OPINION
The Commissioner’s determinations in a notice of deficiency are generally
presumed correct, and the taxpayer bears the burden of proving that the
determinations are in error. Rule 142(a); Welch v. Helvering, 290 U.S. 111, 115
(1933).
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Dependency Exemption Deduction
Generally, a taxpayer may claim dependency exemption deductions for all
individuals who are dependents of the taxpayer for the taxable year. Sec. 151(a),
(c). “Dependent” is defined by section 152(a) as including “a qualifying child”.
Sec. 152(a)(1).
In the case of divorced or separated parents, section 152(e) provides a
special rule to determine which parent is entitled to a dependency exemption
deduction for a child. Generally, a child who is in the custody of one or both of
the child’s parents for more than one-half of the calendar year and receives more
than one-half of his or her support from parents who are divorced or separated or
who live apart at all times during the last six months of the calendar year will be
considered the qualifying child of the custodial parent. Sec. 152(e)(1). Section
152(e)(4)(A) defines the custodial parent as “the parent having custody for the
greater portion of the calendar year.” Section 152(e)(4)(B) defines the
noncustodial parent as “the parent who is not the custodial parent.” The minor
child did not live with Mr. Swint during the year at issue. As a result, Mr. Swint
was the noncustodial parent of the minor child. See sec. 152(e)(4)(B).
Pursuant to section 152(e), a child will be treated as a qualifying child of the
noncustodial parent rather than of the custodial parent when certain criteria are
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met. One of the requirements for the child to be the qualifying child of the
noncustodial parent is that “the custodial parent signs a written declaration (in
such manner and form as the Secretary may by regulations prescribe) that such
custodial parent will not claim such child as a dependent for any taxable year
beginning in such calendar year”. Sec. 152(e)(2)(A).
“The declaration required under section 152(e)(2) must be made either on a
completed Form 8332 or on a statement conforming to the substance of Form
8332.” Miller v. Commissioner, 114 T.C. 184, 189 (2000). Form 8332,
Release/Revocation of Release of Claim to Exemption for Child by Custodial
Parent, provides an effective and uniform way for a custodial parent to make the
declaration required in section 152(e)(2)(A) for the benefit of the noncustodial
parent. Armstrong v. Commissioner, 139 T.C. 468, 472 (2012). Form 8332
requires a taxpayer to furnish: the name of the child, the name and Social Security
number of the noncustodial parent claiming the dependency exemption deduction;
the Social Security number of the custodial parent; the signature of the custodial
parent; the date of the custodial parent’s signature; and the year(s) for which the
claims were released.
Petitioner argues that the agreed entry filed February 13, 1998, suffices as a
written declaration conforming to the substance of Form 8332. In respondent’s
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posttrial supplement to his pretrial memorandum, respondent argues that
“[d]ivorce decrees, or comparable documents, do not suffice for the purposes of a
written waiver by Form 8332 or a substantially conforming document under
section 152(e).” Respondent relies on footnote 6 in Armstrong v. Commissioner,
139 T.C. at 472 n.6:
For taxable years starting after July 2, 2008, a court order signed by
the custodial parent will not satisfy 26 C.F.R. section 1.152-
4(e)(1)(ii), Income Tax Regs. * * * (“A written declaration not on the
form designated by the IRS 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 this section. A court order or
decree or a separation agreement may not serve as a written
declaration”).
This footnote in Armstrong was dictum and did not have any effect on the holding
of that case. Armstrong involved a 2007 tax year.
Section 1.152-4(e)(1)(ii), Income Tax Regs., does provide that for taxable
years starting after July 2, 2008, a “court order or decree or a separation agreement
may not serve as a written declaration”, and the taxable year in issue here is 2009.
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However, section 1.152-4(e)(5), Income Tax Regs., also provides a transition rule
that creates a carveout to section 1.152-4(e)(1)(ii), Income Tax Regs.
§ 1.152-4(e). Written declaration.--
* * * * * * *
(5) Written declaration executed in a taxable year beginning on
or before July 2, 2008.--A written declaration executed in a taxable
year beginning on or before July 2, 2008, that satisfies the
requirements for the form of a written declaration in effect at the time
the written declaration is executed, will be treated as meeting the
requirements of paragraph (e)(1) of this section. * * *
Under section 1.152-4(e)(5), Income Tax Regs., if a written declaration was
executed in a taxable year beginning on or before July 2, 2008, we look to the
requirements for the form of a written declaration that were in effect at the time
the written declaration was executed.4
4
Sec. 1.152-4(g), Example (19), Income Tax Regs., explains this as follows:
Example 19. (i) Y and Z are the divorced parents of Child. In
2003, Y and Z enter into a separation agreement, which is
incorporated into a divorce decree, under which Y, the custodial
parent, releases Y’s right to claim Child as a dependent for all future
years. The separation agreement satisfies the requirements for the
form of a written declaration in effect at the time it is executed. Z
attaches a copy of the separation agreement to Z’s returns for 2003
through 2009.
(ii) Under paragraph (e)(1)(ii) of this section, a separation
agreement may not serve as a written declaration. However, under
(continued...)
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The agreed entry was filed on February 13, 1998. Therefore, under section
1.152-4(e)(5), Income Tax Regs., we must determine whether the agreed entry
satisfies the requirements of a written declaration that were in effect as of February
13, 1998. At that time there was no prohibition on using a court order, decree, or
separation agreement as a written declaration for purposes of section 152(e). As a
result, petitioner’s reliance on a court order as the written declaration does not, by
itself, preclude its potential qualification as a “written declaration” for purposes of
section 152. See Chief Counsel Advice 200925041 (May 11, 2009) (“However, a
noncustodial parent may continue to attach pages of a divorce decree or separation
instrument executed on or before July 2, 2008, that unconditionally allows the
noncustodial parent to claim an exemption for a child, if the pages constitute a
statement substantially similar to Form 8332 under the requirements in effect at
the time the decree or agreement was executed.”).
4
(...continued)
paragraph (e)(5) of this section, a written declaration executed in a
taxable year beginning on or before July 2, 2008, that satisfies the
requirements for the form of a written declaration in effect at the time
the written declaration is executed, will be treated as meeting the
requirements of paragraph (e)(1) of this section. Therefore, the
separation agreement may serve as the written declaration required by
paragraph (b)(3)(i) of this section for 2009, and Z may claim Child as
a dependent in 2009 and later years.
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Our recent Opinion in Shenk v. Commissioner, 140 T.C. ___ (May 6, 2013),
involved the taxable year 2009, to which section 1.152-4(e)(1)(ii), Income Tax
Regs., applied. However, the divorce decree in Shenk was entered in 2003. Id. at
___ (slip op. at 3-4). Nevertheless, in dictum (the Opinion was decided on other
grounds) in footnote 3 we stated:
For the year at issue here, a signed judgment copy of a court order
cannot satisfy section 152(e)(2). See 26 C.F.R. sec. 1.152-4(e)(1)(ii)
(“A court order or decree or a separation agreement may not serve as
a written declaration”). * * * See Armstrong v. Commissioner, 139
T.C. ___ (Dec. 19, 2012); 26 C.F.R. sec. 1.152-4(e)(1)(i).
Id. at ___ n.3 (slip op. at 10).
For reasons previously stated we believe that the above dictum in Shenk was
incomplete and that a court order or decree or a separation agreement entered prior
to July 2, 2008, can be a written declaration if it satisfies the other requirements in
effect at the time of the entry. See sec. 1.152-4(e)(5), Income Tax Regs.
We must now determine whether the other requirements for a written
declaration, that were in existence when the agreed entry was filed, have been met
in order for the agreed entry to qualify as a written declaration under section
152(e).
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Signature Requirement
As of February 13, 1998, section 152(e)(2)(A) provided that the
noncustodial parent could claim the dependency exemption deduction if “the
custodial parent signs a written declaration (in such manner and form as the
Secretary may by regulations prescribe) that such custodial parent will not claim
such child as a dependent for any taxable year beginning in such calendar year”.
(Emphasis added.) The signature requirement is derived from the plain language
of section 152(e)(2)(A) that was in effect at the time the agreed entry was filed.
“This Court consistently has held that section 152(e)(2) clearly and
unambiguously requires the custodial parent to sign a written declaration releasing
the dependency exemption for his or her child to the noncustodial parent.” Miller
v. Commissioner, 114 T.C. at 193. “Satisfying the signature requirement is critical
to the successful release of the dependency exemption within the meaning of
section 152(e)(2).” Id. at 190. “Section 152(e)(2) and the corresponding
regulations require, unequivocally, that the signature of the custodial parent be
attached to the return of a noncustodial parent claiming a dependency exemption,
regardless of the form or nature of the documentation attached to the return.” Neal
v. Commissioner, T.C. Memo. 1999-97, 1999 Tax Ct. Memo LEXIS 113, at *14;
see also Shenk v. Commissioner, 140 T.C. at ___ (slip op. at 12); Paulson v.
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Commissioner, T.C. Memo. 1996-560, 1996 Tax Ct. Memo LEXIS 579, at *10
(“Petitioner did not attach IRS Form 8332 to his returns for any of the years in
question, nor did he attach any other written statement, signed by his former
spouse, which would, in substance, comply with the requirements of section
152(e)(2)(A)”. (Emphasis added.)). A State court order that is not signed by the
custodial parent does not satisfy the express statutory requirements of section
152(e)(2)(A). See Miller v. Commissioner, 114 T.C. at 196.
The agreed entry was not signed by the custodial parent. Accordingly, we
hold that the agreed entry did not satisfy the signature requirement of section
152(e)(2)(A).
Unconditional Declaration Requirement
As of February 13, 1998, section 152(e)(2)(A) provided that the
noncustodial parent could claim the dependency exemption deduction if “the
custodial parent signs a written declaration (in such manner and form as the
Secretary may by regulations prescribe) that such custodial parent will not claim
such child as a dependent for any taxable year beginning in such calendar year”.
(Emphasis added.) The language “will not claim” in section 152(e)(2)(A) is
unconditional. As a result, in order for a written declaration to comply with
section 152(e)(2)(A) the declaration by the custodial parent that he or she “will not
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claim such child as a dependent” must also be unconditional. This Court has
previously held that a conditional declaration does not comply with section
152(e)(2)(A). See Armstrong v. Commissioner, 139 T.C. at 474 (“her conditional
declaration is at odds with the statute”); see also Gessic v. Commissioner, T.C.
Memo. 2010-88, 2010 Tax Ct. Memo LEXIS 93, at *7-*8; White v.
Commissioner, T.C. Memo. 1996-438, 1996 Tax Ct. Memo LEXIS 455, at *8.
Prior to 1985, the definition of “dependent” led to substantial controversy in
cases involving divorced or separated taxpayers because determining which parent
provided over one-half of a child’s support presented “difficult problems of proof
and substantiation.” H.R. Rept. No. 98-432 (Part 2), at 1498 (1984), 1984
U.S.C.C.A.N. 697, 1140; see also Miller v. Commissioner, 114 T.C. at 187. In
1984, Congress amended section 152(e) to remove the requirement for the
noncustodial parent to pay child support in excess of certain thresholds. See
Deficit Reduction Act of 1984, Pub. L. No. 98-369, sec. 423(a), 98 Stat. at 799.
Instead, Congress required that the custodial parent sign a written declaration that
he or she “will not claim” the child as a dependent. See id.; sec. 152(e)(2)(A).
This amendment removed the substantial evidentiary disputes that this Court
previously had to resolve in determining which parent could claim the deduction.
If the dependency exemption deduction was permitted to be released upon the
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satisfaction of a conditional declaration, this Court would have to revert to
resolving those “difficult problems of proof and substantiation” that we were
supposed to leave behind with the prior scheme. See Armstrong v. Commissioner,
139 T.C. at 475.
Petitioner argues that we should reconsider our previous Opinions in Miller,
Armstrong, and Shenk regarding the signature and unconditional waiver
requirements because the import of the transitional rule as it affects the signature
and unconditional waiver requirements was not before the Court in those cases.
We decline this invitation. Those cases all involved the sufficiency of purported
written declarations made prior to July 2, 2008, and correctly considered the
statutory and regulatory requirements in existence at the time the writings were
created. The transition rule does not eliminate any requirements for a valid written
declaration that were in existence before July 2, 2008. In fact, the transition rule
confirms the validity of the requirements that were in existence before the
effective date. See sec. 1.152-4(e)(5), Income Tax Regs. (quoted supra p. 5).
The agreed entry provided that Mr. Swint would be entitled to claim the
minor child only if he was current in his child support obligations. If Mr. Swint
was not current on those obligations, then Ms. Wilson would have been entitled to
claim the minor child. The release of the dependency exemption deduction by Ms.
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Wilson in the agreed entry was conditional. Accordingly, we hold that the
declaration in the agreed entry did not satisfy the unconditional declaration
requirement of section 152(e)(2)(A).
Conclusion
As of February 13, 1998, section 152(e)(2)(A) required the custodial parent
to sign a written declaration that he or she “will not claim” the child as a
dependent. The agreed entry did not satisfy the signature requirement or the
unconditional declaration requirement. Accordingly, we hold that the agreed entry
did not satisfy the requirements for the form of a written declaration as of
February 13, 1998. Therefore, under section 152 the minor child was not a
qualifying child of Mr. Swint for the year at issue. As a result, petitioner is not
entitled to a dependency exemption deduction for the minor child for the year at
issue.
Child Tax Credit
A taxpayer is entitled to a child tax credit for “each qualifying child”, as
defined in section 152, who has not reached the age of 17. Sec. 24(a), (c)(1).
Given our determination that, under section 152, the minor child was not a
“qualifying child” of Mr. Swint for the year at issue, it follows that petitioner is
not entitled to a child tax credit for the minor child for that year.
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In reaching our decision, we have considered all arguments made by the
parties, and to the extent not mentioned or addressed, they are irrelevant or
without merit.
To reflect the foregoing,
Decision will be entered for
respondent.