Sad dependency story

[Koss]

Further thoughts

See the post by Gary2, above, in which he confirms my view on this. You gotta find out how many credit hours she was taking, because the check box on the 1098-T is not reliable.

http://www.thetaxbook.com/forums/showthread.php?p=120284

I concede that if she was not taking enough credit hours to be considered at least half-time then she cannot claim the refundable AOC.

What's interesting about this case is that even if she was taking enough credit hours to be considered full-time, if she formally withdrew from school in January, then she wasn't a student for some part of five calendar months, which means that she is not her mother's qualifying child.

The IRS instructions for Form 8863 state that she cannot claim the refundable AOC if she was a full-time student under age 24 and her earned income was less than one half of her support. But these instructions do not explicitly define the term full-time student.

I don't have time to look it up right now, but it seems to me that the intent is to prohibit a student from claiming the refundable AOC if they meet the criteria to be a qualifying child of a living parent, even if that parent elects not to claim them as a qualifying child. I suspect that the code section that addresses this issue refers back to IRC 152 for the definition of a full-time student. If I'm correct, then my point is this:

At least in theory, the girl might have been enrolled full-time, but only for a few days or a couple weeks, because Mark said she left school in January. If so, then she was not a student for purposes of a the qualifying child test, nor was she a student for purposes of the rules that would prohibit her from claiming the refundable AOC, because she wasn't a student for five months of the year.

But she doesn't have to be a full-time student for five months to claim the refundable AOC. She only has to be a half-time student who was enrolled for at least one academic period.

If she was only enrolled for part of January and then formally withdrew, then I think she was still enrolled for one academic period, because the tuition was never refunded.

BMK

[Jesse]

Jesse wrote:



That restriction is only applicable if the girl was a full-time student.

To solve this riddle, Mark needs to determine whether she was a full-time student, and, if she was not, whether she was at least half-time.

BMK

I see - and if a full time student she can be Mom's dependent.

[EA Carol]

Expanded question

My client is on the borderline of being claimed as a dependent. I could make the argument either way. My expanded question is, would there be circumstances where a child under the age of 24, claiming themselves as a dependent is eligble for the AOC non refundable part but not the refundable part. Does the statement on page 12-2 of the 2010 Tax Book "Students age 19-23 who did not provide more than half their support with earned income." apply only to those students whose parents don't claim them as dependents and they do not claim themselves? If the student claims themselves as a dependent are they then elegible for the full meal deal?
Thanks for your help.

[dtlee]

The rule for the refundable portion of the credit follows the rules for being subject to the Kiddie Tax. In other words, the student does not have to be a dependent nor even live with nor be partially supported by a parent to be ineligible for the refundable portion of the credit.

If this student's earned income does not comprise more than half of his/her support, he/she is not eligible for the refundable portion of the credit if he/she has any living parent.

[appelman]

Jesse's last post is right

She CANNOT claim the refundable credit because she meets criteria 1b, 2, and 3 from the instructions to line 13 of Form 8863. Whether she is a full- or part-time student is irrelevant.

[Gary2]

She CANNOT claim the refundable credit because she meets criteria 1b, 2, and 3 from the instructions to line 13 of Form 8863. Whether she is a full- or part-time student is irrelevant.

Criterion 1b is that the person be 18 at the end of the year, not at least 18 or over 18, but 18. If the person is 19 at the end of the year, then 1b doesn't apply but 1c might.

I don't think any of the examples given here state the person is 18. The base note says 20 explicitly, while the new case by EA Carol quotes the 19-23 rule, implying the student is over 18.

[appelman]

Nice catch!

That does seem to be what it says. I do wonder if it is what they meant to say.

[Gary2]

That does seem to be what it says. I do wonder if it is what they meant to say.

It's a correct interpretation of what Congress said, but I won't venture a guess as to whether it's what Congress intended.

If I recall correctly, the kiddie tax rules used to apply to dependents under 18. When Congress extended the rules to those over 18, which added the earned income vs. support test, it was with reference to the existing age requirements for being a qualifying child. Thus the distinction between those who are 18 and those who are 19 and over.

This is an example of where a minor tweak to the law could have made a noticeable simplification to the tax code. All Congress had to do was to change the existing kiddie tax rule to "under 19" instead of "under 18", and then, if they want, add the rule for 19 and over plus the earned income/support test.