Just a question

[Unregistered]

We are having a delima with these new changes.

Here is the question. A boyfriend and girlfriend live together girlfriend has children that do not belong to boyfriend. Girlfriend has no income what so ever. We have decided that boyfriend can claim girlfriend but not get head of household. However can boyfriend claim girlfriends children? We know if he can that he will not qualify for any of the tax credits nor for head of household. However can he claim them and get the dependency for them?

Thanks so much.

Kim

[Bees Knees]

Boyfriend cannot claim the child as a dependent because the child is not his child, therefore, the child cannot be the boyfriend's qualifying child.

The child could be the boyfriend's qualifying relative if the child lived with the boyfriend for the entire year and the boyfriend supported the child.

However, since the child is the qualifying child of the mother, and a qualifying relative cannot be a qualifying child of any other person, then the child cannot be the qualifying relative of the boyfriend. Thus, the boyfriend cannot claim the child as a dependent.

See TTB page 3-16, 8th situation.

Koss may disagree with this, but that is the way the code reads.

[Bill Tubbs]

>>Koss may disagree with this, but that is the way the code reads.<<

Bees Knees' description is definitely the more conservative route, and that is the way the 1040 instructions seem to read.

Personally, I am on the fence with Koss' position. To me, his position on the tax code is likely the correct one (I agree with his logic). The examples in the various pubs on these new rules are weak at best, and perhapd the 1040 instructions are also weak or poorly worded. BTW, Koss' position is that the b/f could claim the g/f kid(s) -- reason being that since the kids can't be dependents of g/f because she herself is a dependent, that the kids aren't QC for purpose of dependency tests for others.

I think this matter won't be settled until either the courts decide, or congress clears things up a bit. If I were to get a client in today with this situation, I would present the option of Koss' position, along with a risk/warning.

Bill

[Bees Knees]

BTW, Koss' position is that the b/f could claim the g/f kid(s) -- reason being that since the kids can't be dependents of g/f because she herself is a dependent, that the kids aren't QC for purpose of dependency tests for others.

I don't think that interpretation holds water in light of the fact that two situations allow the taxpayer to claim the child tax credit even though the child does not qualify as a dependent. Form 8901 allows the taxpayer to take the child tax credit if the taxpayer can't claim the child as a dependent because:
1) The taxpayer is claimed as a dependent on someone else's return, or
2) The qualifying child is married and files a joint return.

Under Section 24(c), the child must STILL be considered a qualifying child, as defined in Section 152(c). The code here clearly uses the term "qualifying child" in reference to the child that does not necessarily have to be claimed as a dependent under the two situations listed on Form 8901.

[Bees Knees]

It should also be noted that in Section 24(c) for the child tax credit and Section 2(1)(A)(i) for Head of Household, the term used is "qualifying child." In contrast, Section 21(b)(1) for the dependent care expense credit, it uses the term "qualifying individual" which is defined as someone claimed as a dependent or a disabled spouse.

The uniform definition of a qualifying child is only uniform to the extent of relationships, such as child, grandchild, brother, sister, niece, nephew, etc. etc. It is a uniform definition in that the same relationships apply to all five tax benefits. It is not uniform in application of who qualifies for the various benefits. So the term cannot be exclusive to, or tied to a child that qualifies the taxpayer for the dependency exemption, nor can it be said the rules have to be consistent. It is ONLY uniform in defining the relationships that must exist to be considered a "qualifying child."

[Bees Knees]

It should also be noted that there are numerous examples in the code where tax rules that are completely unrelated to each other often play off of each other for purposes of defining terms. Rather than re-state the same definition over and over, Congress often says, for purposes of this section, a qualifying whatever has the same definition as used in code section such and such. The two codes have no relationship to each other, but they play off each other’s definitions of terms. A person doesn’t necessarily have to utilize the other code section to qualify for the section that uses the other’s definitions. Thus, Burton’s argument that a qualifying child has to be a dependent because the definition appears under the dependency code section is not consistent with the way the definition of various terms are applied in other code sections.

[Bees Knees]

A person doesn’t necessarily have to utilize the other code section to qualify for the section that uses the other’s definitions. Thus, Burton’s argument that a qualifying child has to be a dependent because the definition appears under the dependency code section is not consistent with the way the definition of various terms are applied in other code sections.

A good example if this was the old definition of Section 179 property. Up until 1990, the definition of property that qualified for the Section 179 deduction was tangible property to which section 38 applies. Old Section 38 was repealed in 1984 and referred to the investment tax credit. The old definition of Section 179 property was defined by a code section that had been repealed for some six years. Yet, you were still allowed to claim a Section 179 deduction on property even though you could no longer claim the investment tax credit on that same property.

[dtlee]

Bees Knees

When you say,

"A person doesn’t necessarily have to utilize the other code section to qualify for the section that uses the other’s definitions."

Are you implying that each section stands alone?

The IRS ties them all together saying if you, for example, have a Qualifying Child for EIC purposes, then no one can use that person for a dependent or any other purpose even if you don't.

The tiebreaker rules appear to be part of the dependent Qualifying Child definition that is referenced in the other sections of the code. Do you favor applying the tiebreaker rules separately for each benefit?

Just trying to understand what ties these together and what splits them apart from your perspective.

Thanks.

[Bees Knees]

No.

The tie breaker rule IS a part of the qualifying child definition. It is found at Section 152(c)(4). But the tie breaker rules apply to 2 or more claiming a qualifying child. Section 152(c)(4)(A) says:..."if an individual may be and is claimed as a qualifying child by 2 or more taxpayers ....such individual shall be treated as the qualifying child of the taxpayer who is..."

Clearly, this rule defines a "qualifying child" as a qualifying child of the person who wins the tie.

But in the case of a boyfriend, the child can never be a "qualifying child." The child can only be a dependent of the boyfriend under the qualifying relative rules of Section 152(d), and the tie breaker rules only apply to a "qualifying child," not a "qualifying relative."

Therefore in the case of a mother and child living with a boyfriend, the tie breaker rules do not apply and the child can only be the qualifying child of the mother.

[Bees Knees]

It should also be noted that there is no code section that says if you have a Qualifying Child for EIC purposes, then no one can use that person for a dependent or any other purpose.

The restrictions the IRS imposes is an interpretation of how the code limits the use of the rules. For example, Section 32(c)(1)(A)(i) alows the EIC for a person with a "qualifying child." Nowhere in that code does it say that you can't claim EIC on that person if someone else claims that child as a dependent. But the IRS says you can't split the dependency exemption and the EIC tied to one child between more than one taxpayer.

Why?

The reason is that the child that qualifies the taxpayer for EIC has to be a "qualifying child" as defined in section 152(c) without regard to the divorced parent rules. We already have seen that if more than one person has the same qualifying child, the qualifying child will be considered the qualifying child of only one taxpayer under the tie breaker rules. Thus, it would be impossible for more than one person to claim EIC on a qualifying child that is the qualifying child of someone else for purposes of the dependency rules.

[dtlee]

Thanks for the clarification. You are saying that the definition is brought in by reference and the tiebreaker rules are part of the overall definition and not meant to be applied separately to each benefit, even though the definition is referenced and modified for each benefit.

Relative to your point on the EIC, I am not sure I fully understand.

For EIC purposes, there is one other situation where an individual can be claimed as a Qualifying Person for EIC purposes where the person is not a dependent. That is if the person is not able to be claimed as a dependent because that person provided over 1/2 of his/her own support. In that case, it would seem that this person would not be able to be claimed as a dependent by anyone else as a Qualifying Child or Qualifying Relative simply because of the support rules, not because the person was claimed as a Qualifying Child for under the rules in 152(c). In other words, are you saying a Qualifying Child for EIC purposes is not necessarily a Qualifying Child for the purposes of the overall definition?

Thanks again.

[Bees Knees]

For EIC purposes, there is one other situation where an individual can be claimed as a Qualifying Person for EIC purposes where the person is not a dependent. That is if the person is not able to be claimed as a dependent because that person provided over 1/2 of his/her own support. In that case, it would seem that this person would not be able to be claimed as a dependent by anyone else as a Qualifying Child or Qualifying Relative simply because of the support rules, not because the person was claimed as a Qualifying Child for under the rules in 152(c). In other words, are you saying a Qualifying Child for EIC purposes is not necessarily a Qualifying Child for the purposes of the overall definition?

Thanks again.

Section 32(c)(3) defines a qualifying child for purposes of the Earned Income Credit as follows: “In general, the term “qualifying child” means a qualifying child of the taxpayer (as defined in section 152(c), determined without regard to paragraph (1)(D) therof and section 152(e)).”

Section 152(c)(1)(D) is the rule that says a qualifying child cannot have provided over one half of his or her own support. So that is how they come up with that rule - by having that requirement taken out of the term “qualifying child” for purposes of EIC in Section 32.

Again, we see the code here taking a definition used in the dependency rules, and applying certain exceptions and alterations to the definition for purposes of another rule. The child may not be a “qualifying child” in this case under the dependency rules because of not passing Section 152(c)(1)(D), but IS a “qualifying child” for EIC purposes because that code section says it is OK to ignore that specific rule.

[Bees Knees]

It is interesting in this particular case, that if the child did supply over one half of his or her own support, the child is not going to be the “qualifying child” of anyone for purposes of the dependency rules of Section 152(c). Nor is the child going to pass the “qualifying relative” rule of Section 152(d) because nobody else will have been able to pass the over 50% support rule. BUT, Section 32 says he or she can qualify someone for purposes of the EIC. In this case, the “qualifying child” definition for purposes of EIC is defined under the dependency rule (with exceptions), but is not tied to a person claiming the “qualifying child” as a dependent.

[dtlee]

Thank you again. That is how I understood the code to read.

If I could restate how I understand your response...

Being a Qualifying Child for EIC purposes does not use the entire set of rules in Section 152(c) and thus, being a Qualifying Child for EIC purposes does not make the child a Qualifying Child for a purpose such as dependency since the entire rule is not applied for EIC purposes.

However, if some taxpayer did claim a child for dependency under 152(c), it would preclude that child from being considered for EIC purposes, because that child can only be a Qualifying Child for one taxpayer and the EIC rules are a subset of these rules.

The same result being that these two benefits could not be split.

Seems like a convoluted way to write the law if I understand this correctly.

[Bees Knees]

Agreed

That is how I see it. The code requires all kinds of contortions and convoluted twisting and turning to sort things through. That is why it is so easy to misinterpret things. You can’t pull something out of context. It is easy to miss an exception that is located half way across the code book universe from the rules being considered.