Another example is the chart on page 3-17 which has a 5-year-old living with mom and her boyfriend. The scenario assumes the relationship is not in violation of local law. Is it a violation in Florida? Some people say it is while others say the opposite.
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Local Law
The ABA Section on Taxation issued a report in 2006, in which they strongly recommended that Congress or the IRS should make this particular problem go away by clarifying what it means for a relationship to violate local law.
Florida does have a law on the books that appears to make it illegal for an unmarried couple to "cohabitate" in a manner that is "open and notorious." This is the basis for the claim that the relationship violates local law.
Anyone who jumps into this discussion and starts babbling about whether the state in question recognizes common law marriage has no idea what they are talking about; that particular question is totally irrelevant in this context.
I'm fairly certain that the Florida statute in question has not been "enforced" in decades.
But if the return was selected for audit, there is always a possibility that an IRS auditor could disallow the exemption based on this law. I don't know whether some IRS offices have adopted this approach as a systemic policy or not.
Even if the relationship does violate local law, it would not disqualify the taxpayer from claiming an exemption for the woman's child.
The recommendation of the ABA was that the IRS should issue regs stating that a relationship will be deemed to violate local law only if such a violation has actually been found by a local court.
I'm not suggesting that you prepare a return based on a recommendation made by the ABA. But if it was my client, I would be game for challenging it (if it was audited and disallowed, which I think is unlikely anyway).
The ABA report cites some old cases from the 70s, in which the Tax Court ruled against the taxpayer. But like the death penalty, the way courts weigh these things can change over time. In the cases cited by the ABA, the Tax Court seemed to feel powerless to review the validity of the Florida statute; they felt obligated to apply it.
Today, perhaps, if it was my client, and the IRS disallowed the exemption solely on the basis of the Florida statute, I would recommend appealing it--all the way--but skip the Tax Court and go to Federal District Court. And seek to have the Florida statute declared unconstitutional. It violates the equal protection clause of the constitution, and the right to freedom of association.
FYI: I'm not an attorney.
Burton M. Koss
koss@usakoss.netBurton M. Koss
koss@usakoss.net
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The map is not the territory...
and the instruction book is not the process. -
Here is an interesting link:
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