Client supports married parents (more than 50%), whose only income was the father's earnings of $7K. The parents do not file a tax return b/c dad had no withholding and no return is required. Client wants to claim them on tax return. At 1st blush, it'd appear impossible to claim dad b/c gross income is >$4,050, but they live in community property state, so if dad's income is split, both have <$4,050. Can client claim a) mom, b) dad, c) both, d) neither?
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Since no one else has replied, I'll take a shot. I answer (c) both.Originally posted by mbigelow View Post
If you have done a preliminary search on this (excluding court cases, for example), you won't find much, at least I didn't. Although community property rules don't apply to all types of income, they appear to apply for the spouses in your specific scenario, and if they would apply in figuring AGI on MFS returns (if filed), I don't see why they also wouldn't apply for qualified relative dependency purposes.
Although the tax liability involved is probably not huge, you could be conservative and disclose the position taken on Form 8275, although I'd be OK with not doing so if I were the preparer. But in the end, it seems a reasonable position to me."You said it, they'll never know the difference. Come on, we'll paint our way out!" - Moe Howard -
You said TP supports parents, so I assume you have done those calculations, which factor in Social Security as well as any pension and/or investment income, so it is not just wages you take into consideration to meet that threshold. You did not give their ages, but both would draw Soc Sec if over 65. And you did not say whether they owned and lived in their own home, or lived with taxpayer which would be relevant to meet the support requirement.Comment
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I don't have any experience with this, but I'll agree with Rapid Robert.
Although this sentence is missing from the section about Qualifying Relatives, in the section for discussing who must file a tax return, Publication 501 defines "Gross Income":
Gross income is all income you receive in the form of money, goods, property, and services that isn't exempt from tax. If you are married and live with your spouse in a community property state, half of any income defined by state law as community income may be considered yours. For a list of community property states, see Community property states under Married Filing Separately, later.
To be a Qualifying Relative, their "Gross Income" must be less than $4,050. However, as I mentioned before, the definition of "Gross Income" in that section of Publication 501 does not have that sentence about Community Income. In my opinion, leaving that sentence out was not a way of saying that does not apply. In my opinion, that just wasn't a focus of that particular point, and that the same definition of "Gross Income" applies.
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Rev Ruling 54-567 might be of help. The issue was of a dependency for a married child (remember all the "numbers" were lower then) but this paragraph I believe gives some support to TGB & RR. Similar to the original post, only one spouse had earnings.Originally posted by TaxGuyBill View Post
Under the community property laws of Texas the $1,000 earned by the son constitutes community income to him and his wife in the amount of $500 each. See George C. Hopkins, Collector v. C. W. Bacon , Ct. D. 260, 282 U.S. 122, C.B. IX-2, 201 (1930). Since neither had a gross income of $600 or more neither was required to file an income tax return for such year.Comment
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Support has nothing directly to do with income, so the income of the parents doesn't matter. There are costs that are considered support; and there are taxpayers who pay those costs; but income is not a factor.Originally posted by Burke View Post"You said it, they'll never know the difference. Come on, we'll paint our way out!" - Moe HowardComment
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