The Treasury has issued the final regs for IRC Sec. 152(e). This is the section that deals with who is a dependent of divorced, separated or never married parents. It is a must read for those of you who deal with these types of taxpayers as it does contain new information and sheds some clarity by including definitions of terms never before published. E.g., the definition of a night and a definition of custody.
I am adding this commentary because of a statement in today's CCH Headlines (see John Fisher's post) relating to the Sec. 152(e) Final regs.
Here is the CCH Statement:
"A court order or decree or a separation agreement cannot serve as the written declaration. The noncustodial parent must attach a copy of Form 8332 or the written declaration to the parent's return for each year that the child is claimed as a dependent."
If a tax preparer merely relies upon the CCH summary and does not read the regs and the examples, they will miss the fact that there is an exception to the above statement. Paragraph (e)(5) of the Regs states that a written declaration executed in a taxable year on or before 7/2/08 that satisfied the requirements for a written declaration at the time of execution, meets the new requirements for a written declaration. Therefore, a separation agreement or decree that was executed on or before 7/2/08 that unconditionally released the exemption to the noncustodial parent, was signed by the custodial parent and was acceptable to the IRS at the time, may still be used by the noncustodial parent to claim the exemption.
Also note, that in this instance, the custodial parent may use the new unpublished Form 8332 (or written document conforming to the 8332), Release/Revocation of Release of Claim To Exemption For Child by Custodial Parent, to revoke the release contained in the agreement or decree.
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