T.C. Summary Opinion 2005-28
UNITED STATES TAX COURT
JAMES T. AND REBECCA S. WERTHER, Petitioners v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 16858-03S. Filed March 17, 2005.
James T. Werther, pro se.
Robert E. Marum, for respondent.
GOLDBERG, Special Trial Judge: This case was heard pursuant
to the provisions of section 7463 of the Internal Revenue Code in
effect at the time the petition was filed. The decision to be
entered is not reviewable by any other court, and this opinion
should not be cited as authority. Unless otherwise indicated,
subsequent section references are to the Internal Revenue Code in
effect for the year in issue.
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Respondent determined a deficiency in petitioners’ Federal
income tax of $2,195 for the taxable year 2001.
The issues for decision are: (1) Whether petitioners are
entitled to two dependency exemption deductions for petitioner
James T. Werther’s two sons, RW and MW,1 from a previous
marriage; and (2) whether petitioners are entitled to a child tax
credit of $600 for taxable year 2001.
Some of the facts have been stipulated and are so found.
The stipulation of facts and the attached exhibits thereto are
incorporated herein by this reference. Petitioners resided in
Danbury, Connecticut, on the date the petition was filed in this
case. James T. Werther (petitioner) appeared before the Court
and presented petitioners’ case. Petitioner wife, Rebecca S.
Werther, did not appear.
Background
On June 4, 1977, petitioner and Eileen M. Werther (Eileen)
were married. During the marriage, petitioner and Eileen had
four children: AW, born in 1979; JW, born in 1982; RW, born in
1984; and MW, born in 1985.
On April 13, 1993, Eileen and petitioner were divorced by an
order issued by the State of Louisiana in a divorce proceeding
1
The Court uses only the minor children’s initials.
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initiated by petitioner.2 On September 20, 1994, Eileen and
petitioner entered into a final separation agreement covering
matters that were not addressed by the Louisiana order. Also on
September 20, 1994, a hearing was conducted before the Chittenden
Family Court, Chittenden County, State of Vermont. On October
12, 1994, the Chittenden Family Court entered a final order,
which incorporated matters covered in the final separation
agreement. Paragraph 1 of the final order provided:
[Eileen] shall have the legal and physical parental rights
and responsibilities of the parties’ following minor
children: (a) [JW], (b) [RW], (c) [MW].
Paragraph 18 of the final order provided:
In future years [after 1993], the parties shall allocate the
children for dependency purposes in such manner as most
reduces the overall tax burden of both parties, provided,
however, that if Plaintiff [Eileen] incurs a greater tax
liability than if she were to claim the three youngest
children as dependents, Defendant [petitioner] shall make up
the difference to Plaintiff [Eileen] and pay her by April
15th of that year.
On or about April 3, 2002, petitioners filed their Form
1040, U.S. Individual Income Tax Return, for the 2001 taxable
year. In their return, petitioners claimed RW and MW as their
dependents and claimed the resulting exemption deductions, as
well as a $600 child tax credit. There was no attachment
regarding any waiver or declaration, such as a Form 8332, Release
of Claim to Exemption for Child of Divorced or Separated Parents,
2
After his divorce from Eileen, petitioner married Rebecca
S. Werther (petitioner wife).
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executed by Eileen stating that she was releasing her claim to
exemption deductions for RW and MW.
During the 2001 taxable year, petitioners did not have
physical or legal custody of RW and MW. Eileen did not execute
or sign any waiver or declaration, such as Form 8332, stating
that she was releasing her claim to exemption deductions for RW
and MW.
Respondent issued a notice of deficiency to petitioners in
which respondent disallowed petitioners’ claimed exemption
deductions for RW and MW for the 2001 taxable year, as well as
the child tax credit of $600.
Discussion3
A. Deductions for Dependency Exemptions
Section 151(a) authorizes deductions for the exemptions
provided by that section. In particular, section 151(c)(1)
provides an exemption for each of a taxpayer’s dependents as
defined in section 152.
Section 152(a)(1) defines the term “dependent” to include a
taxpayer’s child, provided that more than half of the child’s
support was received from the taxpayer or is treated under
section 152(e) as received from the taxpayer.
3
We decide the issues in this case without regard to the
burden of proof. Accordingly, we need not decide whether the
general rule of sec. 7491(a)(1) is applicable in this case. See
Higbee v. Commissioner, 116 T.C. 438 (2001).
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In the case of a child of divorced parents, section
152(e)(1) provides as a general rule that the child shall be
treated as receiving over half of his or her support from the
custodial parent. Custody is determined by the terms of the most
recent decree of divorce or subsequent custody decree, and “will
be deemed to be with the parent who, as between both parents, has
the physical custody of the child for the greater portion of the
calendar year.” Sec. 1.152-4(b), Income Tax Regs. Thus, in the
present case, because Eileen had legal custody of RW and MW
throughout 2001 (as well as physical custody throughout the year)
she was the custodial parent in 2001, and petitioner was the
noncustodial parent.
Section 152(e)(2) provides an exception to the general rule
of section 152(e)(1). Pursuant to that exception, the child
shall be treated as receiving over half of his or her support
from the noncustodial parent if:
(A) the custodial parent signs a written declaration
(in such manner and form as the Secretary may by regulations
prescribe) that such custodial parent will not claim such
child as a dependent for any taxable year beginning in such
calendar year, and
(B) the noncustodial parent attaches such written
declaration to the noncustodial parent’s return for the
taxable year beginning during such calendar year.
See sec. 1.152-4T(a), Q&A-3, Temporary Income Tax Regs., 49 Fed.
Reg. 34459 (Aug. 31, 1984).
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The declaration required by section 152(e)(2)(A) must be
made on either the official form provided by the Internal Revenue
Service (IRS), Form 8332, or on a statement conforming to the
substance of that form. Miller v. Commissioner, 114 T.C. 184,
189 (2000), affd. sub nom. Lovejoy v. Commissioner, 293 F.3d 1208
(10th Cir. 2002). Form 8332 calls for the following information:
(1) The name of the child or children for whom an exemption claim
is released; (2) the applicable tax year or years for which the
claims are released; (3) the custodial parent’s signature and the
date of signature; (4) the custodial parent’s Social Security
number; (5) the noncustodial parent’s name; and (6) the
noncustodial parent’s Social Security number. “The exemption may
be released for a single year, for a number of specified years
(for example, alternate years), or for all future years, as
specified in the declaration.” Sec. 1.152-4T(a), Q&A-4,
Temporary Income Tax Regs., supra.
In the present case, Eileen, as the custodial parent, did
not sign Form 8332 or any written declaration or statement
agreeing not to claim exemption deductions for RW and MW, and no
such form, declaration, or statement was attached to petitioners’
return for the year in issue.
However, petitioner argues that in the past he has been
allowed the deduction and by not allowing the deduction in 2001
the IRS “broke its own precedent”. Upon the basis of the record
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and the applicable law, we disagree with petitioner’s argument.
Every tax year stands by itself, and respondent’s prior action is
of no consequence here. Petitioner admits that he was the
noncustodial parent in 2001 and that Eileen did not execute a
written declaration, such as a Form 8332, indicating that she,
the custodial parent, would not claim exemption deductions for RW
and MW for the year 2001. Petitioner does not argue that he
attached any statement or written declaration to his and his
current wife’s 2001 joint tax return that would satisfy the
requirements of section 152(e)(2)(A).
Although the divorce decree, by and through its own terms,
provides the opportunity for petitioner to be entitled to
dependency exemptions for RW and MW, it is well settled that
State courts by their decisions cannot determine issues of
Federal tax law. See Commissioner v. Tower, 327 U.S. 280 (1946);
Kenfield v. United States, 783 F.2d 966 (10th Cir. 1986); Neal v.
Commissioner, T.C. Memo. 1999-97; Nieto v. Commissioner, T.C.
Memo. 1992-296.
Unfortunately, regardless of what is stated in the State
divorce decree, the law is clear that petitioner is entitled to
the child dependency exemption in 2001 only if he complied with
the provisions of section 152(e)(2). Petitioner has failed in
this regard. It follows, therefore, that the exception set forth
in section 152(e)(2) does not apply and that the general rule of
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section 152(e)(1) does apply. Accordingly, petitioners are not
entitled to dependency exemption deductions for RW and MW for
2001. See sec. 152(e)(1); Miller v. Commissioner, supra.
Respondent’s determination on this issue is sustained.
B. Child Tax Credit
Section 24(a) authorizes a child tax credit with respect to
each “qualifying child” of the taxpayer. The term “qualifying
child” is defined in section 24(c). As relevant here, a
“qualifying child” means an individual with respect to whom the
taxpayer is allowed a deduction under section 151. Sec.
24(c)(1)(A).
We have already held that petitioners are not entitled to
dependency exemption deductions under section 151 for RW and MW.
Accordingly, RW and MW are not considered “qualifying children”
within the meaning of section 24(c). It follows, therefore, that
petitioners are not entitled to a child tax credit under section
24(a) with respect to RW and MW.
In view of the foregoing, we sustain respondent’s
determination on this issue.
Furthermore, we have considered all of the other arguments
made by petitioners, and, to the extent that we have not
specifically addressed them, we conclude they are without merit.
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Reviewed and adopted as the report of the Small Tax Case
Division.
Decision will be entered
for respondent.