Question -

[AJsTax]

This question was sent to me by another preparer asking my opinion. I have several, some of which are not polite.
The question, as it common, does not give enough information for an informed opinion, but this is all of it from the test:

Instructions: For each taxpayer, indicate in the space provided whether he or she has a dependent (“D”) or no dependent (“ND”).



"Question … Orville and Marsha are married. Kevin is their qualifying relative. No one can claim Orville on his tax return.

Marsha may be claimed by her father, but he is not going to claim her. Kevin is not married. Orville, Marsha, and Kevin are all U.S. citizens.

Answer: ND —Since Marsha can be claimed by her father, she and Orville cannot claim a dependent on their return."


The next question came up, can Orville file MFS and claim the QR?
I say the situation is nearly impossible, if the couple provide the support for a QR, they can neither one be a dependent to their parent. Unless they do not live together..

And from reading the references I could get my hands on quick this morning, I believe the qualification goes the other way, if the Younger couple files a joint return with a dependent , the father of the spouse is disqualified from claiming her.

Can anyone add to this? Can Orville file MFS?

[appelman]

As you say...

If they file jointly, Marsha CANNOT be claimed as a dependent by her father (p. 19 of 1040 instructions). Therefore they may claim Kevin if he meets the requirements for a qualifying relative. If they file separately, Orville may claim Kevin if he provides more than half or Kevin's support. (I'm not quite sure of what happens in a community property state.)

[Dusty2004]

Answers

Since they are married Marsha cannot be claimed by her father unless Marsha will owe 0 tax. I say Marsha and Orville can claim Kevin as their dependent.

I say yes - Orville can claim is he file MFS.

Dusty

[Gary2]

The entire point of this question is to test the rule that if a couple files jointly, and either one of them could be claimed as a dependent, then they can't claim dependents on their joint return. (Pub 501, page 11, Dependent Taxpayer Test, second paragraph.) Any question to test that rule is going to be contrived. The question isn't intended to dig any deeper than that rule.

It is theoretically possible, if they meet the exception to the joint return test. Orville, filing MFS, with Kevin as his QR, could have roughly $12K income with no tax liability (and let's assume no credits). Marsha, filing MFS and as a dependent, could have $5700 in earnings with no tax liability. Combined, they'd still have no tax liability. They could be living with Marsha's parents, both 22, Marsha a full-time student, and dad paying her $30K tuition - so no way Marsha is supporting herself. But Kevin could be Orville's step-brother, living in a house inherited by Orville (as sole owner) but in which Orville doesn't live, with Orville supporting Kevin using funds that Orville inherited.

It's harder to come up with numbers where there's an advantage to MFJ over MFS that doesn't also violate the exception.

[Gary2]

If they file jointly, Marsha CANNOT be claimed as a dependent by her father

Since they are married Marsha cannot be claimed by her father unless Marsha will owe 0 tax.

Let's clear up these two statements.

There's an exception to the joint return test, so it's certainly possible that Marsha can be claimed by her father even filing jointly. On the other hand, the fact that Marsha is married never means that she can't be claimed by her father regardless of her tax liability - she could always choose to file separately. And all it takes is high withholding for her to get a refund.