Divorced father entitled to dependency tax exemption, rules US Tax Court

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A divorced father could claim a dependency exemption on his federal income taxes – even though his child’s mother refused to sign the form ordinarily required by the IRS for such exemptions, the U.S. Tax Court has ruled.

The taxpayer divorced in 2001. Although his child lives with his former wife for most of the year, their separation agreement provided that the taxpayer was entitled to claim the child as his dependent. In addition, the wife promised to fill out the form required by the IRS when allocating the dependency exemption to a noncustodial parent (customarily Form 8332), as long as the taxpayer kept current with his child support payments.

The wife refused to execute a Form 8332 for the 2006 tax year, even though the taxpayer had paid his child support.

To substantiate his entitlement to the exemption, the taxpayer attached a copy of his separation agreement to his federal income tax return instead.

The IRS disallowed the exemption and child tax credit, determining that the copy of the separation agreement was not an adequate substitute for a duly executed Form 8332.

But the court decided that the taxpayer had sufficiently demonstrated his entitlement to the dependency exemption.

“Here, there’s no ambiguity about what year [the taxpayer] was entitled to claim [his child] as a dependent: The separation agreement is unequivocal that ‘[f]or calendar year 2000 and for any taxable years henceforth, the Father shall be entitled to claim the minor child … as a dependent exemption for purposes of income tax returns.’ [The taxpayer’s] entitlement is absolute: The only omission on the agreement was the parents’ Social Security numbers and even those the parties later stipulated. … [C]onsistent with the plain language of [Internal Revenue Code] §152(e)(2), this oversight isn’t fatal to the separation agreement’s serving as the required declaration,” the court said.

U.S. Tax Court. Scalone v. Commissioner, No. 15287-08S.