non resident with US child, dependency exemption denied

[mariavdb]

I have helped a dutch non-resident with W2 and self employment income, and a Us born child. After filing her 1040NR, she got a letter from the IRS stating that the dependency exemptions was denied because her country of residence (The Netherlands) didn't allow it.
Can someone help me out on this? I thought non residents could claim their own exemptions and the dependency exemptions
thanks

[Gary2]

From the 1040NR instructions:

Only U.S. nationals, residents of Canada, Mexico, and South Korea, and residents of India who were students or business apprentices may claim an exemption for a spouse or a dependent

[ATSMAN]

For 1040NR before even you start you have to refer to the tax treaty with the foreigners country to make sure what rules apply.

[New York Enrolled Agent]

Does this follow-up to Gary2's post offer any help?

From IRS PMTA 01185

There are some circumstances under which a taxpayer would not be entitled to a personal exemption. Under section 151(d)(2) of the Code, a taxpayer may not claim his own personal exemption if another taxpayer has the right to claim it. However, this issue does not usually arise with nonresident aliens because under section 152(b)(3) of the Code, a dependency exemption for an individual cannot be allowed if the dependent is not a U.S. citizen, a U.S. national, or a resident alien of the United States. The exceptions to this general rule are as follows:


(1) spouses or dependents who are residents of Canada or Mexico;
(2) spouses or dependents who are U.S. nationals (i.e., citizens of American Samoa or the Commonwealth of the Northern Mariana Islands);

(3) spouses or dependents who are residents of South Korea (cf. article 4(7) of the USA-Korea income tax treaty);

(4) spouses or dependents of students or trainees who are residents of India (cf. article 21(2) of the USA-India income tax treaty, as explained by Revenue Procedure 93-20). Although Rev. Proc. 93-20 allows a personal exemption for the spouse of the student or trainee from India if the spouse has no U.S. gross income and the spouse cannot be claimed as the dependent of another taxpayer, Rev. Proc. 93-20 does not allow a dependency exemption for any other individual unless the dependent is a U.S. citizen or a resident alien of the USA.

[mariavdb]

Thanks NY EA,
It helps, but I still have a question. As the code says ' a dependency exemption cannot be allowed if the dependent is not a US citizen etc" but in this case the child is a US citizen.
So I thought that the kid could be a dependent.
Otherwise does this mean that the kids dependency exemption is lost??
thanks

Does this follow-up to Gary2's post offer any help?

From IRS PMTA 01185

There are some circumstances under which a taxpayer would not be entitled to a personal exemption. Under section 151(d)(2) of the Code, a taxpayer may not claim his own personal exemption if another taxpayer has the right to claim it. However, this issue does not usually arise with nonresident aliens because under section 152(b)(3) of the Code, a dependency exemption for an individual cannot be allowed if the dependent is not a U.S. citizen, a U.S. national, or a resident alien of the United States. The exceptions to this general rule are as follows:


(1) spouses or dependents who are residents of Canada or Mexico;
(2) spouses or dependents who are U.S. nationals (i.e., citizens of American Samoa or the Commonwealth of the Northern Mariana Islands);

(3) spouses or dependents who are residents of South Korea (cf. article 4(7) of the USA-Korea income tax treaty);

(4) spouses or dependents of students or trainees who are residents of India (cf. article 21(2) of the USA-India income tax treaty, as explained by Revenue Procedure 93-20). Although Rev. Proc. 93-20 allows a personal exemption for the spouse of the student or trainee from India if the spouse has no U.S. gross income and the spouse cannot be claimed as the dependent of another taxpayer, Rev. Proc. 93-20 does not allow a dependency exemption for any other individual unless the dependent is a U.S. citizen or a resident alien of the USA.

[Gary2]

I think a point that's easy to miss is that there are two disjoint sets of rules coming into play. On a 1040, we only worry about whether the potential dependent meets the rules for being a QC or QR. However, on a 1040NR, before you even get to asking whether or not a potential dependent satisfies either the QC or QR rules, you must first ask whether the primary taxpayer is allowed to claim any dependents on the 1040NR. The answer is usually no, even when all the QC/QR requirements are met.

[FEDUKE404]

1040 vs 1040NR rules

i think a point that's easy to miss is that there are two disjoint sets of rules coming into play. On a 1040, we only worry about whether the potential dependent meets the rules for being a qc or qr. However, on a 1040nr, before you even get to asking whether or not a potential dependent satisfies either the qc or qr rules, you must first ask whether the primary taxpayer is allowed to claim any dependents on the 1040nr. The answer is usually no, even when all the qc/qr requirements are met.

Ex-act-ly !!!