Hicks v. Commissioner
T.C. Memo. 2022-10

On February 23, 2022, the Tax Court issued a Memorandum Opinion in the case of Hicks v. Commissioner (T.C. Memo. 2022-10). The primary issue presented in Hicks v. Commissioner was whether the petitioner was entitled to the dependency exemption deductions and child tax credits claimed on his income tax return.

Background to Hicks v. Commissioner

The petitioner has two children with one Ms. Oddimissia N. Johnson who were minors in 2014, the year at issue. Oddimissia were never married and did not cohabitate in 2014. In fact, Oddimissia lived with her mother Juanita, as did the two children (for more than ½ of the year). The petitioner provided over ½ of the children’s financial support in 2014.

Hicks v. CommissionerIn 2006, an Ohio state court adopted a shared parenting plan, signed by Oddimissia and the petitioner, which provided that Oddimissia could claim Child 1 every year for tax purposes, and the petitioner could claim Child 2.[1]

I hope that they at least have nicknames for the poor kids, like “Uno” for Child 1 and “Deuce” for Child 2.

In 2009, the same court adjusted the child support obligations, and providing that the petitioner “shall claim the dependency exemption for both children” for 2009 and future years.

The petitioner timely filed his 2014 federal income tax return, on which he claimed dependency exemption deductions and child tax credits for the two children. He did not attach any of the following to his 2014 return: (1) Form 8332, Release/Revocation of Release of Claim to Exemption for Child by Custodial Parent, (2) a written declaration or any other waiver signed by Oddimissia, or (3) a pre-2008 court decree or separation agreement. He has, however, since given the IRS a copy of the Shared Parenting Plan that Oddimissia signed and the state court adopted in 2006.

Hicks request denied tom wellingOddimissia did not file a federal income tax return for 2014; however, Juanita was more on the ball, and so filed her personal 2014 return on which she claimed a dependency exemption deduction for Oddimissia and for each of the two children on that return.

The IRS subsequently issued a notice of deficiency to the petitioner denying the dependency exemption deductions and the child tax credits he claimed for the children. The petitioner filed a timely Petition for redetermination.

The Basic Law of the Dependency Exemption

IRC § 151(a) and (c) allows a taxpayer to claim a deduction for each individual who is a dependent of the taxpayer as defined in IRC § 152, which in turn defines the term “dependent” to mean either a “qualifying child” or a “qualifying relative” of the taxpayer.[2]

In order to be a taxpayer’s qualifying child, an individual must:

    1. bear a specified relationship to the taxpayer, including being a child or grandchild thereof;
    2. have the same principal place of abode as the taxpayer for more than one-half of the taxable year;
    3. meet certain age requirements;
    4. have not provided more than one-half of his or her own support for the year; and
    5. if married, have not filed a joint return (other than only for a claim of refund) with his or her spouse.[3]
Hicks Not the Father
At least for tax purposes…

The petitioner concedes that the children resided with Oddimissia for more than one-half of 2014. Thus, the children did not have the same principal place of abode as the petitioner for more than one-half of 2014. Consequently, Uno and Deuce are not his qualifying children for 2014.[4]

The term “qualifying relative” means an individual:

    1. who bears a specified relationship to the taxpayer, including being a child or grandchild thereof;
    2. whose gross income is less than the exemption amount ($3,950 for 2014);
    3. with respect to whom the taxpayer provides over one-half of his or her support; and
    4. who is not a qualifying child of the taxpayer or of any other taxpayer.[5]

The IRS concedes that the petitioner provided over one-half of the children’s support for 2014, because, well, he did. Further, Uno and Deuce were freeloading minors with no income of their own, and, so, they satisfy the foregoing relationship and income tests. The Tax Court, therefore examined whether the children are the qualifying children of any other taxpayer, since it already determined that the children are not the qualifying children of the petitioner.

The children meet the requirements under IRC § 152(c)(1) to be the qualifying children of both Oddimissia and Juanita. To wit, they are the children of Oddimissia and the grandchildren of Juanita. Uno and Deuce had the same principal place of abode as Oddimissia and Juanita for more than one-half of 2014. They were freeloading minors in 2014, who failed to provide more than one-half (or any) of their own support, and who failed (well, to be fair, were not required) to file joint returns in 2014.

Uno was going steady with a nice boy named Trey, but neither Oddimissia nor Juanita blessed the union. Thus, no joint returns were filed. Deuce’s relationship with Septimius was doomed from the start and ended prior to what would have been their one-year anniversary on Christmas Eve.

Hicks Sad Christmas

A “tie-breaker” rule under IRC § 152(c)(4)(A) provides that if an individual “may be claimed as a qualifying child” by two or more taxpayers, such individual shall be treated as the qualifying child of the taxpayer who is the parent of the individual (or, if a parent does not so qualify, the taxpayer with the highest adjusted gross income for the taxable year).

Critically, however, IRC § 152(b)(1) provides that if an individual is a dependent of a taxpayer for any taxable year, that individual shall be treated as having no dependents for that year. Since Juanita claimed Oddimissia as a dependent for 2014, Oddimissia is treated as having zero dependents in 2014 under IRC § 152(b)(1). Consequently, the children may not be claimed as qualifying children by Oddimissia for 2014, and the tie-breaker rule under IRC § 152(c)(4)(A) does not apply. Accordingly, the children are treated as the qualifying children of Juanita for 2014.

Since the children are the qualifying children of Juanita for 2014, they cannot be the qualifying relatives of the petitioner for that year.[6]

Special Rule for Separated Parents

To recap, Uno and Deuce are not qualifying children of the petitioner for 2014 under the usual requirements of IRC § 152(c) because they did not have the same principal place of abode as the petitioner for more than one-half of the year, as required by IRC § 152(c)(1)(B). However, IRC § 152(e) establishes a special rule for children of divorced or separated parents. Under this special rule, if several criteria are satisfied, a child may be treated as the qualifying child of a parent with whom he or she did not share a principal place of abode for a sufficient portion of the year, regardless of the usual requirement of IRC § 152(c)(1)(B) or the tie-breaker rule of IRC § 152(c)(4).[7]

Hicks Separated
The Offspring GIF would have been too easy here.

IRC § 152(e) applies to a child who is in the custody of one or both parents for more than one-half of a calendar year, receives over one-half of his or her support during the year from his or her parents, and whose parents are divorced, separated, or living apart throughout the last six months of the year.[8] When IRC § 152(e) applies, a child is generally treated as the qualifying child of the “custodial parent.”[9] In turn, the term “custodial parent” is defined as “the parent having custody [of the child] for the greater portion of the calendar year,” while the “noncustodial parent” is exactly who you’d imagine it would be, that is, “the parent who is not the custodial parent.”[10]

The petitioner provided over one-half of the children’s support for 2014, and he and Oddimissia lived apart throughout the year. Additionally, as the Tax Court has noted, the petitioner concedes that the children resided with Oddimissia for more than one-half of 2014. Thus, the Tax Court held, for purposes of IRC § 152(e), Oddimissia (who had physical custody of the children…so this one’s pretty much on the nose) was the children’s custodial parent, and the petitioner was their noncustodial parent for 2014.

Accordingly, both children would ordinarily be treated as Oddimissia’s qualifying children, and she would thus ordinarily be entitled to claim both dependency exemption deductions pursuant to IRC § 151(c) and IRC § 152(a).

But wait…there’s more.

However, a child is instead treated as the qualifying child of the noncustodial parent—thus shifting the right to claim the dependency exemption deduction for that child to the noncustodial parent—if two conditions are met.

First, the custodial parent may sign “a written declaration (in such manner and form as the Secretary may by regulations prescribe)” stating that he or she “will not claim such child as a dependent” for the year at issue.

Second, the noncustodial parent must attach said written declaration to his or her return for that year.[11] Consequently, as the noncustodial parent, the petitioner’s eligibility to claim a dependency exemption deduction for either child for 2014 depends on whether these written declaration and attachment requirements have both been satisfied.

Written Declaration Requirement

Hicks DeclareThe written declaration requirement may be satisfied either by a completed Form 8332 or by a statement conforming to the substance of Form 8332.[12] Form 8332 provides a uniform method for a custodial parent to make the written declaration necessary to relinquish his or her right to claim a child as a dependent in favor of a noncustodial parent.[13]

Because the petitioner did not actually provide a completed Form 8332 with his return or at any later time to the IRS,[14] he could have satisfied the written declaration requirement only by means of some other document conforming to the substance of Form 8332. The only other documents in the record that purport to shift the right to claim the children as dependents from Oddimissia to the petitioner—and thus the only other documents that could potentially stand in place of a Form 8332—are two state court orders:

    1. the Shared Parenting Plan entered in 2006, which stated that each parent was entitled to “claim” one of the two children for tax purposes, and
    2. the order entered in 2009, which stated that the petitioner “shall claim” the dependency exemption deductions for both of the children beginning with the 2009 taxable year.

The Tax Court has observed that “a court order or decree or a separation agreement entered prior to July 2, 2008, can be a written declaration if it satisfies the other requirements in effect at the time of entry.”[15] However, a court order entered after July 2, 2008, does not satisfy the written declaration requirement for any taxable year beginning after that date.[16]

Consequently, the Ohio state court order entered in 2009 cannot satisfy the written declaration requirement for the petitioner’s 2014 taxable year. However, the Shared Parenting Plan may satisfy the requirement, as long as it meets the requirements governing written declarations for purposes of IRC § 152(e) that were in effect when the state court entered it in 2006.

In 2006, IRC § 152(e)(2)(A) provided that a custodial parent could release his or her claim to a dependency exemption deduction for a child by signing a written declaration in a manner prescribed by the IRS, which declaration stated that the declarant custodial parent will not claim such child as a dependent.

So, if you’re keeping score at home (and enjoy alliteration) this would make Oddimissia a doubtlessly declaring disclaimant of dual dependency deductions.

This provision imposes several requirements on any document that a taxpayer offers as a written declaration for purposes of IRC § 152(e). First, it must be signed by the custodial parent.[17] Second, it must not place any conditions on the custodial parent’s declaration that he or she will not claim a child as a dependent.[18] And third, it must otherwise meet the manner and form requirements the IRS has prescribed by regulation.[19]

The Shared Parenting Plan meets all of these requirements. In addition to bearing Oddimissia’s signature, it grants the petitioner the unconditional right to “claim” one child “every year for tax purposes unless [the] parties reach another agreement in writing.”

Although the state court modified the Shared Parenting Plan in its 2009 order (which neither Oddimissia nor the petitioner signed, though the order represents that they both agreed with its terms), those modifications did not diminish, for federal income tax purposes, the right that Oddimissia granted to the petitioner in the Shared Parenting Plan.

Rather, the 2009 order purported to expand that right by allowing the petitioner to claim both children instead of just one. The agreement reflected in the Shared Parenting Plan therefore remains in effect, regardless of the later state court order purporting to expand on that agreement.

Finally, the 2006 Shared Parenting Plan also comports with the other manner and form requirements prescribed by the regulations that were in effect in 2006. At that time, a noncustodial parent could satisfy the written declaration requirement with either a completed Form 8332 or a statement conforming to the substance of Form 8332.[20] Therefore, if the Shared Parenting Plan conformed to the substance of Form 8332, it could have been used to satisfy the written declaration requirement.

“In order for a document to qualify as a statement conforming to the substance of Form 8332, it must contain substantially the same information required by Form 8332.”[21] Form 8332 would have required:

    1. the names of the children for whom exemption claims were released;
    2. the years for which the claims were released;
    3. the custodial parent’s signature;
    4. the date of the custodial parent’s signature;
    5. the noncustodial parent’s name; and
    6. both parents’ Social Security numbers.[22]

The 2006 Shared Parenting Plan included Uno and Deuce’s (real) names, the years for which the petitioner could claim that child (“every year”), Oddimissia’s signature, the state court’s date stamp; and the petitioner’s name.

Thus, the only information that would have been required by Form 8332 that was not included in the Shared Parenting Plan was each parent’s Social Security number. However, the Tax Court has previously held that the absence of either parent’s Social Security number, standing alone, does not determine whether a document conforms to the substance of Form 8332.[23]

Furthermore, any claim for a dependency exemption deduction must include the claimed dependent’s taxpayer identification number.[24] The IRS’s ability to identify duplicate exemption claims therefore is not hampered by a written declaration that lacks the parents’ Social Security numbers. The Tax Court accordingly concluded that the Shared Parenting Plan contains sufficient information to conform to the substance of Form 8332.

The Shared Parenting Plan thus satisfies all requirements applicable to written declarations for purposes of IRC § 152(e) that were in effect when the state court entered it in 2006. For his 2014 taxable year, therefore, the petitioner could rely on the Shared Parenting Plan to satisfy the written declaration requirement with respect to the one child it allows him to claim as a dependent.

This would have been rather like Sophie’s choice. He could only choose one. Luckily, the state court assigned Deuce to the petitioner, and so he could always refer Uno to the document if her feelings were hurt.

Hicks Sophies Choice

Attachment Requirement

Under proposed regulations published in 2017, a noncustodial parent is generally required to attach a copy of the written declaration to a return that claims a dependency exemption.[25] However, a noncustodial parent also may either attach a copy of the written declaration to an amended return or “submit a copy of the written declaration to the IRS during an examination.”[26] Until the proposed regulations become final, “taxpayers may choose to apply [them] in any open taxable years.”[27] A taxable year remains open while it is pending before this Court.[28]

The petitioner’s 2014 taxable year thus remains open, and Proposed Treasury Regulation § 1.152-5(e)(2)(i) permits him to substantiate his claim to a dependency exemption by submitting the Shared Parenting Plan to the IRS (which he has now done), even though it was not attached to his original return. Furthermore, the IRS in its Pretrial Memorandum and posttrial Opening Brief never mentions Proposed Treasury Regulation § 1.152-5(e)(2)(i), nor did the IRS make any specific argument that the petitioner failed to satisfy the attachment requirement with respect to the Shared Parenting Plan.

Hicks the office deuceUnder the circumstances of this case, the petitioner, therefore, properly substantiated his right to claim one of the two children (Deuce) as a dependent for 2014. As provided by IRC § 152(e)(1) and (2), that child is treated as the petitioner’s qualifying child for 2014.

He is accordingly entitled to one dependency exemption deduction for that year under IRC § 151(c).

Child Tax Credit

A taxpayer may claim a child tax credit for “each qualifying child” for which the taxpayer is allowed a deduction under IRC § 151.[29] A qualifying child for purposes of IRC § 24 is a “qualifying child” as defined in IRC § 152(c), who has not attained the age of 17.[30] Because the Tax Court held that the petitioner is treated as having one qualifying child within the meaning of IRC § 152(c) for the 2014 taxable year, it follows that he is also entitled to the child tax credit for one child for that year.

(T.C. Memo. 2022-10) Hicks v. Commissioner

Footnotes:
  1. Very lazy and eclectic names for children, but with a mother named Oddimissia, anything’s fair game, I suppose. ↑
  2. See IRC § 152(a)(1), (c) (qualifying child); IRC § 152(a)(2), (d) (qualifying relative). ↑
  3. IRC § 152(c)(1) and (2). ↑
  4. See § 152(c)(1)(B). ↑
  5. IRC § 152(d)(1) and (2). ↑
  6. See IRC § 152(d)(1)(D). ↑
  7. See IRC § 152(e); Swint v. Commissioner, 142 T.C. 131, 133 (2014); Seeliger v. Commissioner, T.C. Memo. 2017-175, at *4‑6. ↑
  8. IRC § 152(e)(1). ↑
  9. See § 152(e)(1), (4); Swint, 142 T.C. at 133. ↑
  10. IRC § 152(e)(4); see also Maher v. Commissioner, T.C. Memo. 2003-85, slip op. at *10 (stating that the Court has repeatedly looked to where a child resided to determine which parent had physical custody for purposes of IRC § 152(e)(1)); Treas. Reg. § 1.152-4(d)(1). ↑
  11. IRC § 152(e)(2). ↑
  12. See Swint, 142 T.C. at 133-34 (citing Miller v. Commissioner, 114 T.C. 184, 189 (2000)); Treas. Reg. § 1.152-4(e)(1)(ii). ↑
  13. See Swint, 142 T.C. at 134 (citing Armstrong v. Commissioner, 139 T.C. 468, 472 (2012), aff’d, 745 F.3d 890 (8th Cir. 2014)). ↑
  14. It could very well be that Lady Oddimissia refused to sign it—the record does not say. ↑
  15. Swint, 142 T.C. at 136 (citing Treasury Regulation § 1.152-4(e)(5)). ↑
  16. See Treas. Reg. § 1.152-4(e)(1)(ii), (h). ↑
  17. See Swint, 142 T.C. at 136-37. ↑
  18. See id. at 137-39. ↑
  19. See Miller, 114 T.C. at 188-90. ↑
  20. See Himes v. Commissioner, T.C. Memo. 2010-97, slip op. at 5; Treas. Reg. § 1.152-4T(a), Q&A (3) (2006) (removed by T.D. 9408 (2008)). ↑
  21. Miller, 114 T.C. at 191. ↑
  22. See Himes, T.C. Memo. 2010-97, slip op. at 5. ↑
  23. See Boltinghouse v. Commissioner, T.C. Memo. 2003-134, slip op. at 9 (noting that inclusion of the noncustodial parent’s Social Security number elsewhere on a return renders it “superfluous” in a written declaration); Bramante v. Commissioner, T.C. Memo. 2002-228, slip op. at 6 (“Neither the statute nor the regulations require … the custodial parent’s Social Security number.”). ↑
  24. See IRC § 151(e). ↑
  25. Prop. Treas. Reg. § 1.152-5(e)(2)(i), 82 Fed. Reg. at 6387 (2017). ↑
  26. Id.; see also Skitzki v. Commissioner, T.C. Memo. 2019-106, at *10 n.10; DeMar v. Commissioner, T.C. Memo. 2019-91, at *5-6. ↑
  27. Preamble to Prop. Treas. Regs., 82 Fed. Reg. at 6377. ↑
  28. See IRC § 6503(a)(1). ↑
  29. IRC § 24(a). ↑
  30. IRC § 24(c)(1). ↑
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