Courts Fight Back

[Corduroy Frog]

Slowly since 2008 it is sinking in to local divorce courts that the judges can no longer determine which party can deduct children. So I have seen some strange things in the last 3-4 divorces I've encountered.

"Custody" language is being replaced by "Residency" and awarded to the party the court wants to have the exemption. Also seen "custody" of child for 182.5 days for father and 182.5 days for mother. Also, rather than leave anything for the parties to duke out, decrees are directing parties to issue Federal Form 8332 to the party they want to have the exemption.

None of this flies in the face of the IRS as it stands. I'm sure the big IRS push to award to the custodial parent was an attempt to deny the higher-paid spouse the deduction. Bottom line: by using the tools mentioned above, the local courts are simply reclaiming their former power to award exemptions.

As I see it, the only factors to thwart the intent of the court is if the parties do not abide by the decree. For example if one spouse fails to give an 8332 to the other as directed. Or child doesn't stay with party as directed by the court.

[ttbtaxes]

This issue should never bear fruit if the attorney is doing his or her job. The attorney for the non-custodial spouse should insist that the custodial spouse sign releases before the divorce is signed and finalized. This issue only rears its ugly head when attorneys don't have a full grasp of the tax rules and do a terrible disservice to their client by not buttoning up this issue from the gitgo.

[JohnH]

Unfortunately, the children are usually way down the list of priorities in many (many most) divorces. Everyone in the process pays lip service to the "interests of the children" , but in fact they are just one of the pawns moved around on the divorce chessboard by the lawyers & judges. Accuracy with regard to tax laws takes a back seat to the bigger game of dividing up the property and clever language in the agreements.

[Koss]

Custodial Parent

I'm sure the big IRS push to award to the custodial parent was an attempt to deny the higher-paid spouse the deduction.

I'm not sure I agree. That certainly may be the outcome in many cases. But I'm not sure that was the original intent.

Here in Ohio, and many other states, the state law has evolved into something commonly referred to as "shared parenting." Clients often try to take the position that the child literally lives with both parents, and that the time is really split half and half. That would appear to be the intent of language in the divorce instrument that refers to 182.5 days with each parent. Actually, the IRS counts the number of nights. But that's a separate issue...

In some cases, I think my clients are telling the truth, i.e., that the child lives with one parent three or four days per week, and with the other parent the other three or four days per week. But mathematically, unless it is a leap year (which 2012 was), it will still work out that one parent has the child more days than the other. A reference to 182.5 days actually fails to address the issue, because the IRS counts nights. And that actually makes sense, because it eliminates mind-bending discussions about days where the kid is with one parent part of the day, and then goes to the other parent... so you don't have to start talking about the number of hours, and rounding... The IRS counts nights.

But let's assume, for the sake of argument, that somehow, the kid actually spends equal time with each parent, and that this fact is not disputed by either parent, or by the IRS.

Pub. 17 now says that if the child spends an equal number of nights with each parent, then the custodial parent, by definition, is the parent with higher income.

Some states are using terms such as "residential parent," or "primary residential custody," while also using concepts such as "shared parenting." Defining one parent as "primary" may help address issues such as which [i]school[i] the child attends. In the absence of a detailed evidence such as a journal or calendar, this language could be used to support an argument that the child lived with the "primary residential parent" for more than half the year, so that makes her (or him) the custodial parent.

But if the taxpayer maintains that the child truly lives with each parent an equal number of nights, it actually turns the traditional model on its head.

Yes, times have changed a lot over the last 40 years or so. It may be a mistake to automatically assume, in all cases, that young children will be better off living with their mother. And it is not always the case that the mother has a lower income.

But the socioeconomic reality is that the mother often has a lower income. And even when the courts order "shared parenting," the children often spend more nights with the mother than the father.

If the parents insist the the time is really split equally, then that makes the parent with the higher income--usually the father--the custodial parent.

BMK