Custody of 18+ year old

[Kram BergGold]

The following is an interpretation of the new regs re exemptions for older teens of custodial an dnon custodial parents.

The “custodial parent” is now defined as “the parent with whom the child resides with for the greater number of nights during the calendar year”. No longer will this be determined based on the number of days, but now it is based on the number of nights.

Further a child is not considered residing with either parent starting with the date the child is emancipated under state law (reaches the age of majority). Therefore a child who reaches the age of majority on or before the day after the half-way point of the year (normally July 3) will not be in the custody of the parents for MORE THAN ½ of the year.

My questions,
if the child is considered as not residing with either parent, does this mean neither can be head of household and the child at best is a qualifying relative of one of them?

If this is true, does it change things if one spouse is dead?

Maybe this rule just prohibits using Form 8332 for 18+ year olds but all other rules are in effect. If so, then I guess the parent with custody for more than 50% of the year can be H of H as long as they get dependency exemption under qualifying child tests. However, the the parent with less custody could argue that they provided more than 50% of support,
then what?

I find this most confusing.

[dtlee]

I believe you understood most of this correctly. I had posted this earlier this year based on a recent TC Memo.

Once a child reaches majority age he/she is not considered in the custody of either parent, but could still be living with one of them.

In other words, if the child is living with his mother who is divorced from his father, and he (the child) meets the qualifications of a Qualifying Child of the mother, the mother cannot use form 8332 to allow the father to claim the child. Only the mother can claim the child because the rules for divorced and separated parents cease to apply if the child is of majority age (by local law) for more than half the year.

The point I raised earlier this year is that while the Kiddie Tax now extends to children up through age 23, it becomes unclear what to do if the child is of majority age and the parents are divorced. Those rules say to use the tax return of the custodial parent. Since there is no custodial parent of a child of majority age, there is no such tax return to use.

[Roland Slugg]

Clarification of that age

... the Kiddie Tax now extends to children up through age 23.

Just a clarification here: The Kiddie Tax now extends to children who are under 18 as the end of the tax year ... or ....

... for tax years beginning after May 25, 2007 it applies when the child's earned income doesn't exceed one-half of his support and the child is age 18 or is a full-time student age 19-23. (Code §1(g)(2))

Some "clarification" huh?

[dtlee]

Just a clarification here: The Kiddie Tax now extends to children who are under 18 as the end of the tax year ... or ....

... for tax years beginning after May 25, 2007 it applies when the child's earned income doesn't exceed one-half of his support and the child is age 18 or is a full-time student age 19-23. (Code §1(g)(2))

Some "clarification" huh?

Yes! I was not being very precise. Thank you, Roland.

[Jesse]

The following is an interpretation of the new regs re exemptions for older teens of custodial an dnon custodial parents.

The “custodial parent” is now defined as “the parent with whom the child resides with for the greater number of nights during the calendar year”. No longer will this be determined based on the number of days, but now it is based on the number of nights.

Further a child is not considered residing with either parent starting with the date the child is emancipated under state law (reaches the age of majority). Therefore a child who reaches the age of majority on or before the day after the half-way point of the year (normally July 3) will not be in the custody of the parents for MORE THAN ½ of the year.

I find this most confusing.

It's my understanding this is only for determining custodial/noncustodial battles.

Qualifying Child/Qualifying Relative/HofH will need to be addressed separately.

My questions,
if the child is considered as not residing with either parent, does this mean neither can be head of household and the child at best is a qualifying relative of one of them?

I find this most confusing.

I would say this to be true, if a qualifying child does not reside w/ you for more than 1/2 the year you can not file H of H, neither parent then would be the "custodial parent", correct?

If this is true, does it change things if one spouse is dead?

I find this most confusing.

Again, it's my understanding this to be a custodial/noncustodial issue, so if one spouse is dead, there would not be a noncustodial parent.

Maybe this rule just prohibits using Form 8332 for 18+ year olds but all other rules are in effect. If so, then I guess the parent with custody for more than 50% of the year can be H of H as long as they get dependency exemption under qualifying child tests. However, the the parent with less custody could argue that they provided more than 50% of support,
then what?

I find this most confusing.

But isn't support provided by either parent considered as "provided by both" parents? This is why we need to count days (now "nights") of physical presence in the actual home. Again, just for purposes of custody and the right of the custodial parent to release the exemption to the noncustodial parent.

After child is 18+ this would be a mute issue as then the the parent with less custody but providing more support, Qual child/Qual relative, etc... would come into play with facts and circumstances taking over.

Notice I left "I find this most confusing" in all of your quotes as I totally agree and I'm sure there will be more to come. And just when I think I have it figured out - into play comes the "exception to the rule". However, I do not know that I am correct that this will only involve the Form 8332 and custodial issue?

[travis bickle]

The following is an interpretation of the new regs re exemptions for older teens of custodial an dnon custodial parents.
. . . .
Further a child is not considered residing with either parent starting with the date the child is emancipated under state law (reaches the age of majority). Therefore a child who reaches the age of majority on or before the day after the half-way point of the year (normally July 3) will not be in the custody of the parents for MORE THAN ½ of the year.

I find this most confusing.

Do you mean to say that when a 17-year-old turns 18, that they then are considered NOT residing with the parent?? How can this possibly be?

Would you mind providing your citation(s) for this statement?

[Jesse]

Do you mean to say that when a 17-year-old turns 18, that they then are considered NOT residing with the parent?? How can this possibly be?

Would you mind providing your citation(s) for this statement?

Travis,
Again this is for custodial disputes and form 8332. Actual facts and circumstances would come into play to determine Qualifying Child/Qualifying relative. After the child turns of age there is no longer a custody battle, meaning there is not a custodial parent that can agree not to claim the child thus allowing the Non-custodial parent to claim the exemption. However, the child can still be a Qualifying child/Qualifying relative of one of the parents.

[travis bickle]

Thank you

Travis,
Again this is for custodial disputes. . . .

very much.

For some reason, my mind did not twig to that VERY IMPORTANT point.

I KNEW it could not possibly mean what I thought I was reading.

Thanks for setting me straight.

[dtlee]

Do you mean to say that when a 17-year-old turns 18, that they then are considered NOT residing with the parent?? How can this possibly be?

Would you mind providing your citation(s) for this statement?

Just to reiterate what Jesse said....

When a child reaches majority age based on local law (18 in most states, but up to 21 in others), the child ceases to be in the "custody" of anyone. So if the Child reaches majority age, for example, in May, the child ceases to be in the parent's custody in May.

Once the child is not in either parent's custody for more than half the year, the "custodial" parent cannot use form 8332 to allow the noncustodial parent to claim the dependency. Thus, if a child is over the age of 18 (in most states) for more than half the year, Form 8332 cannot be used to allow the noncustodial parent cannot claim the dependent as a Qualifying Child. The special rule for divorced or separated children does not apply. This is despite the fact that many divorce decrees specify that the noncustodial parent can claim the exemption for years after the child reaches majority age if the child remains in school.

I am not a lawyer, but I believe that when a parent and child changes state of residence, the rules fall under the new state. A parent who moves with his/her child to New York will increase the age of majority and a parent moving from New York to Florida will decrease the age of majority. If the child is not emancipated under local law, the child remains in the parent's custody.

By the way, since it is based on the same concept of "custody" I have claimed that this is also a "hole" in the Kiddie Tax rules since a child who is above majority age is not in either parent's custody and does not have a custodial parent. The law was not written to indicate that the child should use the tax return of the parent with whom he/she lives. It was written for "Kiddies" and "Kiddies" have custodial parents. When the extended the rules to include older individuals, they did not change this part of the code.

[Kram BergGold]

IRS has made this worse

My take on this is, if we are doing both parents returns or if we absolutley know what the other parent did or is going to do and only one parent is going to claim the kid then we can skip this nonsense and just have the parent claim the kid. But if we don't know what the other parent is doing we have to be very careful. Agreed?

[dtlee]

My take on this is, if we are doing both parents returns or if we absolutley know what the other parent did or is going to do and only one parent is going to claim the kid then we can skip this nonsense and just have the parent claim the kid. But if we don't know what the other parent is doing we have to be very careful. Agreed?

I totally agree. I just had a client work through his lawyer to get a Form 8332 signed for all future years for his two eldest sons who will be reaching majority age soon.

Since we have no idea what the wife will do, it is likely that no one will claim the children at some point. She won't know that he can't and he won't know that she didn't.

[solomon]

Do you mean to say that when a 17-year-old turns 18, that they then are considered NOT residing with the parent?? How can this possibly be?

Would you mind providing your citation(s) for this statement?

Here is the Reg. 1.152-4 --- Note example 6

http://ecfr.gpoaccess.gov/cgi/t/text/text-idx?c=ecfr&sid=62798a7152a8597113c1e657f2200452&rgn=div8&view=text&node=26:2.0.1.1.1.0.7.246&idno=26

[Jesse]

I also agree and many times feel for the children stuck in the middle, as some divorces are just so bitter and trying to get the signed Form 8332 is like pulling teeth and just makes the bitter ex even more bitter.

I do like the revocation clause. I have told my clients NOT to sign for future years because you don't know what tomorrow will bring. Now that it can be revoked, I think it will help to have the Form 8332 match the divorce decree for "all future odd years" or "all future even years", and if circumstances change it can be revoked.

I do have one parent, who came to me after signing "for all future years". The ex got into trouble, lost his job and just took off. Yet every year it is a race to file because he would take the children for dependents and EIC, even though he has not even seen nor even paid a penny for the support of his children for the past three years. We did go thru the tax advocacy service, but man how time consuming for us. She did not get the dependency exemptions, of course because she signed off for all future years, but she did receive the EIC.

Now she can revoke "for all future years" and receive the proper dependency exemptions too - or so I hope.

[erchess]

I am confused about just one point

Let's say that cutiepie has wealth to trigger Kiddie tax. Now in 2008 she turns majority age for resident state before 3 July but she continues to be a dependent of her parents and she continues to have wealth in her name such that if she were a year younger Kiddie Tax would apply. Is anyone saying that because of her age Kiddie Tax does not apply for 08?

[solomon]

Let's say that cutiepie has wealth to trigger Kiddie tax. Now in 2008 she turns majority age for resident state before 3 July but she continues to be a dependent of her parents and she continues to have wealth in her name such that if she were a year younger Kiddie Tax would apply. Is anyone saying that because of her age Kiddie Tax does not apply for 08?

I don't think the tax would not apply because of reaching majority age assuming IRC 152(c) applied. In addition, divorced or legally separated parents (or not living together per IRC 7703) would not negate the tax at majority age - assuming alive.

Although Reg. 1.152-4 now states IRC 152(e) ceases to apply at the age of majority, nevertheless, for Kiddie Tax purposes IRC 1(g)(5)(A) still applies IRC 152(e) to tie the appropriate parent's rate to the child.