Divorce situation..your thoughts

[Art]

Clients were divorced in Dec 2011. They have 2 children. Divorce decree provides that the husband gets the exemption for the oldest child and wife gets the youngest child. There is no alimony and no child support. Couple lived together till wife moved out in Sept and she maintains a separate residence. Joint custody agreement provides that each of the children reside with each parent about 50% of the time. Each parent maintains a home and pays for >50% of the cost of a home. They split all support costs for the children 50/50. Husband has higher AGI. Who is entitled to the tax benefits?

Husband entitled to dependency exemption for both but signs the 8332 to the wife for the dependency exemption for the youngest child per the divorce decree. She also gets the CTC, but not any of the following:

HOH
Child & dependent care expense/credit
EIC
Health coverage tax credit

He can file HOH, get dependency exemption for the oldest child, EIC and dependent care and health coverage credit (if applicable) for both children.

Agree ?

If the wife could show that the youngest child spent more than 50% of the nights with her and the husband could show that the oldest child spent more that 50% of the nights with him, then each spouse could possibly qualify for all of the tax benefits (HOH, child & dependent care, EIC, and health coverage tax credit)

Agree?

[Kram BergGold]

My View

If the older child spent one more day with the husband than the wife, Sep-Dec then he is H of H. If the younger child spent 1 more day Sep=Dec with wife she is H of H. I see no reason for Form 8332. Both are custodial parents.

[Jesse]

Agree with Kram, I have a divorced couple that splits 50/50 for the school year and daughter stays with Mom in the summer because they are into water sports, but son stays with Dad because they are into baseball. Each have one of their two children greater than 1/2 the year. In the divorced year they would need to count the nights , as Kram pointed out, the children were with parent from the time they split in Sep to Dec.

[appelman]

Can wife really claim HofH?

Any way you cut it, it doesn't seem that she is paying more than half the cost of keeping up a home in which she lived and in which a qualifying person lived for more than half the year. Or am I missing something?

[Gary2]

Any way you cut it, it doesn't seem that she is paying more than half the cost of keeping up a home in which she lived and in which a qualifying person lived for more than half the year. Or am I missing something?

I think you're probably right, and it's a good catch. It's not necessarily true that just because the husband had the higher AGI, that he paid more than half the costs while he and his ex were still living together, though it does seem like the most likely case.

In theory, the numbers during the period that they were still living together could be close enough so that one could qualify just on that period, but the other could qualify by combining the together and apart periods. There are really two different household accounts to look at, one for each child.

[Art]

If the older child spent one more day with the husband than the wife, Sep-Dec then he is H of H. If the younger child spent 1 more day Sep=Dec with wife she is H of H. I see no reason for Form 8332. Both are custodial parents.

Sorry, I did not clarify that in the above fact pattern (as you stated) the Form 8332 would not be required.

[Art]

Thanks for the thoughful response.

You give me pause to take a closer look at each parents income and actual amount spent for support and the exact amount of nights that each child spent to see of HOH could apply to both.

In the 1st set of facts my thinking was if the time spent by children after the parents separated was exactly 50/50, then who is the custodial parent ?

If the "qualifying child of more than one person" rules apply then the AGI tie-breaker rule would give the husband all of the tax benefits.(See TTB 3-16 4th example in the chart).I believe that he still could consent to the 8332 giving the wife the dependency exemption and child tax credit, but she would not qualify for HOH, EIC, ect.

[dan doshan]

One thing is now (since 2009 I think) you don't have to refer to what the divorce decree says. Means nothing unless it includes an 8332 or document in that format. Plain and simple the custodial parent is the parent with whom the child spent the greater number of nights. If the child spent the same number of nights with each parent then the custodial parent is the parent with the highest AGI. That parent then could give an 8332 to the non custodial parent if they so choose to.

[Gary2]

One thing is now (since 2009 I think) you don't have to refer to what the divorce decree says. Means nothing unless it includes an 8332 or document in that format. Plain and simple the custodial parent is the parent with whom the child spent the greater number of nights. If the child spent the same number of nights with each parent then the custodial parent is the parent with the highest AGI. That parent then could give an 8332 to the non custodial parent if they so choose to.

And this illustrates why they changed the 8332 rule. Even before 2009, the divorce decree meant nothing. The definition of custodial parent didn't change. The "greater number of nights, and if equal, the higher AGI" rule didn't change. Even before 2009, if the divorce decree said A is the custodial parent, but you know that the child was actually living with B, then go by the reality, not the divorce decree.

The only thing that changed is that the release form, whether 8332 or something home grown, can't be an extract of the divorce decree.