Dependency exemption

[oceanlovin'ea]

Situation with client is this:
Married couple, he is 60 and she is 58. He retired from telephone company years ago and has been taking equal and substantial payments from retirement for years. He also works as a handyman at a retirement community.
Their married son and his wife and 3 children have been living with them for almost 3 years. They were going on a church mission, sold their house and then the mission got delayed. So they moved in with mom and dad, waiting to go to Canada. Well, mission got cancelled. Son couldn't find work as we live in an area hit hard with unemployment. Last year dad claimed the whole family as dependents on tax return. No problem there.
Last year son decided to go back in the army. Took a while to get everything cleared but he left in May for retraining. His wife and kids still with mom and dad. Around end of September he will get transferred to a base and family will go where he is.
So grandparents have supported the wife and kids for 9 months of the year. Can they claim the 3 grandchildren as dependents for 2009? I think the grandfather's wages will be higher than his son's wages for the year. If the son signed 8832 and gave permission to grandparents, would that allow the exemption to go through?

I know there is probably an angle I am not thinking about right now. Grandparents have paid all household expenses and bought all food and probably clothes too for grandkids. That is the way they are.

Thanks for your imput.

Linda

[solomon]

Don't think a 8332 must be executed in this case. I think you are okay Per HR 6893 (Public Law 110-351) - note when parent elects not to claim child:

SEC. 501. CLARIFICATION OF UNIFORM DEFINITION OF CHILD.

(a) Child Must Be Younger Than Claimant- Section 152(c)(3)(A) of the Internal Revenue Code of 1986 is amended by inserting `is younger than the taxpayer claiming such individual as a qualifying child and' after `such individual'.

(b) Child Must Be Unmarried- Section 152(c)(1) of such Code is amended by striking `and' at the end of subparagraph (C), by striking the period at the end of subparagraph (D) and inserting `, and', and by adding at the end the following new subparagraph:

`(E) who has not filed a joint return (other than only for a claim of refund) with the individual's spouse under section 6013 for the taxable year beginning in the calendar year in which the taxable year of the taxpayer begins.'.

(c) Restrict Qualifying Child Tax Benefits to Child's Parent-

(1) CHILD TAX CREDIT- Section 24(a) of such Code is amended by inserting `for which the taxpayer is allowed a deduction under section 151' after `of the taxpayer'.

(2) PERSONS OTHER THAN PARENTS CLAIMING QUALIFYING CHILD-

(A) IN GENERAL- Section 152(c)(4) of such Code is amended by adding at the end the following new subparagraph:

`(C) NO PARENT CLAIMING QUALIFYING CHILD- If the parents of an individual may claim such individual as a qualifying child but no parent so claims the individual, such individual may be claimed as the qualifying child of another taxpayer but only if the adjusted gross income of such taxpayer is higher than the highest adjusted gross income of any parent of the individual.

By the way, this change took effect Jan. 1, 2009.

[travis bickle]

I agree with Solomon

(by the way, you made a typo Linda; you meant Form 8332, not 8832).

I was just looking at the 2008 FastTaxFacts [it was right at my elbow when I logged on] and according to the way I read it, the grandparents should be able to claim the grandchildren as QCs, and they may be able to claim their daughter-in-law as a QR.

Re: the daughter-in-law -- obviously you need to examine ALL the numbers including how much money their son earns in 2009 [in order to validate the test that it is okay for her to file a MFJ return because there was no tax liability]. Oh, wow. I am so tired that I cannot tell if that came out in English. Hope this helps.

Lights out,