When A Child Is Treated As A Dependent of Both Parents: Divorced - Separated or Living Apart

Question

The IRS has released RP 2008-48 that describes the circumstances under which the Internal Revenue Service will treat a child of parents who are divorced, separated, or living apart as the dependent of both parents for purposes of §§ 105(b),

106(a),132(h)(2)(B), 213(d)(5), 220(d)(2) and 223(d)(2) of the Internal Revenue Code when the custodial parent has not released the claim to the exemption for the child under § 152(e)(2).

Sec. 105(b) relates to excluding from gross income employer provided medical reimbursements. Sec. 106(a) relates to excluding from gross income employer provided health insurance. Sec. 132(h)(2)(B) relates to excluding from gross income certain employer fringe benefits. Sec. 213(d)(5) relates to certain deductions for medical expenses. Sec. 220(d)(2) & 223(d)(2) relates to excluding from gross income distributions from MSAs & HSAs used for medical expenses.

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Arthur Kamlet · Accepted Answer

If I read this right, this brings the ruls for who is a medical dependent in line with the newer qualified child rules.

The former rules did allow either parent to pay medical expenses and contribute to certain medical plans covering their child, whether or not the child was claimed as a dependent, and this is consistent with that.

For dependency allowance, however, only the custodial parent can claim unless that right was signed away. And for HoH or EIC only the custodial parent can claim and if there is just one custodial parent, HoH/EIC are not assignable.

And notice the IRS is in-your-face insisting a new divorce decree cannot be used to release the dependency exemption. Period.

Alan · Answer

This was written into the final regs published in July 2008 (see below). IRC Sec. 152(e) gives the Secretary the authority to specify the manner or form of the release.

(ii) Form designated by IRS. A written declaration may be made on Form 8332, Release/Revocation of Release of Claim to Exemption for Child by Custodial Parent, or successor form designated by the IRS. A written declaration not on the form designated by the IRS must conform to the substance of that form and must be a document executed for the sole purpose of serving as a written declaration under this section. A court order or decree or a separation agreement may not serve as a written declaration.

When A Child Is Treated As A Dependent of Both Parents: Divorced - Separated or Living Apart

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