T.C. Memo. 2007-178
UNITED STATES TAX COURT
STEVE A. AND DONNA WOOD CHAMBERLAIN, Petitioners v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 10129-05. Filed July 5, 2007.
Steve A. and Donna Wood Chamberlain, pro sese.
J. Craig Young, for respondent.
MEMORANDUM FINDINGS OF FACT AND OPINION
GOEKE, Judge: Respondent determined a $1,047 deficiency in
petitioners’ Federal income tax for the taxable year 2003. The
issue for decision is whether petitioners are entitled to claim a
dependency exemption and a child tax credit for Steven A.
Chamberlain’s child by a previous marriage for the taxable year
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2003, pursuant to sections 1511 and 24, respectively. We hold
that petitioners are not entitled to either the dependency
exemption or the child tax credit, because petitioners failed to
attach a valid Form 8332, Release of Claim to Exemption for Child
of Divorced or Separated Parents, to their joint Federal income
tax return for the taxable year 2003 as required by the Internal
Revenue Code and its corresponding regulations.
FINDINGS OF FACT
Some of the facts have been stipulated and are so found.
The stipulation of facts and the accompanying exhibits are
incorporated herein by this reference. Petitioners are husband
and wife and resided in Roanoke, Virginia, at the time their
petition was filed.
Mr. Chamberlain and Suzanna D. Norris divorced in February
1993. Mr. Chamberlain and Mrs. Norris had two children by their
marriage. The terms of the divorce decree granted custody of
both children to Mrs. Norris, and both children resided with Mrs.
Norris at all times from 1993 through 2003.
After the divorce, Mr. Chamberlain and Mrs. Norris came to
an understanding, wherein each would claim a dependency exemption
for one of their two children. Accordingly, Mrs. Norris executed
separate Forms 8332 for the taxable years 1993 and 1994. Mr.
1
Unless otherwise indicated, all section references are to
the Internal Revenue Code in effect for the year in issue, and
all Rule references are to the Tax Court Rules of Practice and
Procedure.
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Chamberlain attached the forms to his Federal income tax return
for each corresponding year, allowing him to claim a dependency
exemption for that year. Mrs. Norris retained her right to claim
a dependency exemption for the other child since the 1993
divorce.
The parties have stipulated that in 1995 Mrs. Norris
executed a Form 8332 releasing her right to claim one of the
children as a dependent “for all future years”.2 Mr. Chamberlain
affixed the original of this Form 8332 to his 1995 Federal income
tax return; a fire subsequently destroyed all copies in Mr.
Chamberlain’s possession. In 1996 Mr. Chamberlain began
attaching Post-it® notes to ensuing Federal income tax returns
referencing the Form 8332 that Mrs. Norris executed in 1995. Mr.
Chamberlain continued the practice of attaching Post-it® notes
referencing the 1995 Form 8332 through the taxable year 2003.
2
The existence of this Form 8332, Release of Claim to
Exemption for Child of Divorced or Separated Parents, has been a
matter of contention throughout these proceedings. Mr.
Chamberlain claims that he had attached the original Form 8332 to
his 1995 Federal income tax return and that any copy that he
might have retained was destroyed in a fire the following year.
The Internal Revenue Service has since destroyed its files of
individual Federal income tax returns for the taxable year 1995
in accordance with its policies and cannot produce a copy. In
November 2006, however, Mrs. Norris executed a notarized letter
declaring that she relinquished her rights to one of the
dependency exceptions “for all future years”. Respondent
originally protested the admission of Mrs. Norris’s letter into
the record as hearsay; however, in a conference held Feb. 23,
2007, Mrs. Norris acknowledged the letter’s validity. Respondent
subsequently withdrew his objection, and the parties have
stipulated to the existence of the 1995 Form 8332 “for all future
years.”
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The Internal Revenue Service (IRS) did not challenge the
dependency exemption on Mr. Chamberlain’s individual and joint
Federal income tax returns for the taxable years 1996 through
2002, despite Mr. Chamberlain’s failure to comply with the
written declaration requirement.
In their joint Federal income tax return for the taxable
year 2003, petitioners claimed a dependency exemption and a child
tax credit for one child; once again affixing a Post-it® note to
their joint return referencing Mrs. Norris’s 1995 Form 8332.
However, Mrs. Norris and her current husband claimed both
children as dependents on their 2003 joint Federal income tax
return. To protect the Government from the whipsaw effect of
this double claim, respondent determined that petitioners were
not entitled to claim the dependency exemption deduction under
section 151.
In March 2005, respondent issued a $1,047 notice of
deficiency to petitioners for the dependency exemption and child
tax credit claimed for the taxable year 2003. Petitioners timely
petitioned this Court for a redetermination and later amended
their petition. In the amended petition, petitioners addressed
Mrs. Norris’s 1995 Form 8332 declaring that “[The] IRS honored
this Form until 2003”.
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OPINION
A. Applicable Code Sections and Regulations
Section 151 provides a tax exemption as a deduction in
computing taxable income for a taxpayer’s dependents (dependency
exemption). Section 152(a) defines “dependent” to include the
son or daughter of a taxpayer, over half of whose support was
received from the taxpayer for the calendar year in which the
applicable taxable year begins. Section 24 provides a credit
against income tax for each qualified child of a taxpayer who is
under 17 years of age, but the applicable statutory definition of
a qualified child is one for whom a taxpayer may claim a
deduction under section 151. Sec. 24(c)(1)(A). Thus, a taxpayer
is ineligible for the child tax credit under section 24 unless
eligible for the dependency exemption under section 151.
Where the parents of a dependent child are divorced or
legally separated, section 152(e)(1) generally confers the
dependency exemption onto the parent having custody of the child
for the greater portion of the calendar year (custodial parent).3
As an exception to the general rule, a noncustodial parent may
claim the exemption where the custodial parent executes a valid
written declaration releasing his or her claim to the exemption,
3
Sec. 152(e)(1) establishes a support test outlining the
specific requirements for a custodial parent to qualify for this
exemption. Because the issue here involves whether the custodial
parent released her claim to the exemption, and neither party
disputes Mrs. Norris’s satisfaction of the support test, we
decline to discuss it further here.
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and the noncustodial parent attaches that declaration to his or
her Federal income tax return for the taxable year. Sec.
152(e)(2); sec. 1.152-4T(a), Q&A-3, Temporary Income Tax Regs.,
49 Fed. Reg. 34459 (Aug. 31, 1984). Such a declaration may be
executed for a single year, a specified number of years, or for
all future years. Sec. 1.152-4T(a), Q&A-4, Temporary Income Tax
Regs., 49 Fed. Reg. 34459 (Aug. 31, 1984). Where the custodial
parent releases his or her exemption for more than 1 year, the
noncustodial parent must attach the original release to his or
her Federal income tax return for the immediate taxable year and
attach a copy of the release to each succeeding return on which
he or she claims the dependency exemption. Id.
The IRS issued Form 8332 to conventionalize the written
declaration requirement of section 152. Any other written
declaration executed by the custodial parent must conform to its
substance. Sec. 1.152-4T(a), Q&A-3, Temporary Income Tax Regs.,
supra; see Miller v. Commissioner, 114 T.C. 184, 188-189 (2000);
Neal v. Commissioner, T.C. Memo. 1999-97.
B. The Written Declaration Requirement
Respondent urges us to sustain the disallowance of
petitioners’ dependency exemption and child tax credit claimed
for the taxable year 2003, because petitioners did not attach a
Form 8332 or its equivalent to their 2003 joint Federal income
tax return as required by section 152(e)(2) and section 1.152-
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4T(a), Temporary Income Tax Regs, supra.4 The determinations by
the Commissioner in a notice of deficiency are presumed correct,
and the burden of proof is on the taxpayer to prove that the
determinations are in error. Rule 142(a); Welch v. Helvering,
290 U.S. 111, 115 (1933).
Petitioners do not contest failing to attach a valid Form
8332 or an equivalent written declaration to their 2003 joint
return. They have made considerable efforts to locate a copy of
the 1995 Form 8332, but have succeeded only in verifying its one
time existence by eliciting Mrs. Norris’s 2006 confirmatory
letter. Petitioners now ask us to retroactively apply this
missing Form 8332 to their 2003 joint return. This we cannot do.
Failure to attach a valid Form 8332, or an equivalent
written declaration disqualifies a noncustodial taxpayer from
claiming a dependency exemption for the child of a previous
marriage. Paulson v. Commissioner, T.C. Memo. 1996-560; Peck v.
Commissioner, T.C. Memo. 1996-33; see also Brissett v.
Commissioner, T.C. Memo. 2003-310 (compliance with terms of
separation agreement not sufficient to authorize dependency
exemption without attaching valid Form 8332 or equivalent); Neal
v. Commissioner, supra (affixing unsigned Forms 8332 to
taxpayer’s returns resulted in disallowance of dependency
4
Temporary regulations have binding effect and are entitled
to the same weight as final regulations. Peterson Marital Trust
v. Commissioner, 102 T.C. 790, 797 (1994), affd. 78 F.3d 795 (2d
Cir. 1996).
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exemptions for corresponding taxable years regardless of
provisions of divorce decree).
Although we are sympathetic with petitioners’ plight, “we
are bound by the wording of the statute as enacted and the
accompanying regulations, when consistent therewith.” Michaels
v. Commissioner, 87 T.C. 1412, 1417 (1986). The language of
section 152(e), as manifested through its accompanying
regulations, is unambiguous. It grants the dependency exemption
to a noncustodial parent only where he or she attaches a valid
Form 8332 or its equivalent to a Federal income tax return for
the taxable year in which he or she claims the exemption.
Congress added this written declaration requirement to section
152(e) in 1984 to provide more certainty to the “often subjective
and * * * difficult problems of proof and substantiation” that
accompanied dependency exemption disputes under the prior
statute. H. Rept. 98-432 (Part 2), at 1498 (1984). Congress
sought clarity as to which of two divorced parents would receive
the dependency exemption for a taxable year and accomplished it
by conditioning the noncustodial parent’s claim upon the written
verification of the custodial parent’s release of his or her
claim. To preserve Congress’s goal we must insist on strict
adherence to the requirements of section 152. Miller v.
Commissioner, supra at 196; Bramante v. Commissioner, T.C. Memo.
2002-228. Accordingly, we sustain respondent’s disallowance of
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the dependency exemption and child tax credit claimed by
petitioners for the taxable year 2003.5
C. Estoppel
Petitioners further argue that respondent’s past acceptance
of Federal income tax returns that did not conform to the written
declaration requirement estops the disallowance of the dependency
exemption and child tax credit for the taxable year 2003. To
raise estoppel as an affirmative defense a party must
specifically assert it in his or her pleading. Rule 39; Lodi
Iron Works, Inc. v. Commissioner, 29 T.C. 696, 701 (1958).
Although no technical form is required to assert a matter in a
pleading, it must be simple, precise, and direct, so that it
gives the opposing party and the Court fair notice that the
matter is in controversy. Rule 31(a) and (b). Petitioners’
amended petition adheres to these requirements.
Petitioners claim that respondent’s failure to challenge the
dependency exemption on Mr. Chamberlain’s individual and joint
Federal income tax returns for the taxable years 1996 through
2002, despite Mr. Chamberlain’s failure to comply with the
written declaration requirement, should prevent respondent from
now demanding that a Form 8332 accompany their 2003 joint return.
In the alternative, petitioners claim that respondent’s failure
5
We do not address here the question of whether Mrs.
Norris’s notarized letter would fulfill the requirements of Form
8332 if petitioners had had the opportunity to attach it to their
2003 joint return.
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to notify them of the impropriety of these prior returns should
prevent the disallowance of the deduction and credit, because it
denied them the opportunity to retrieve a copy of the 1995 Form
8332 and correct the discrepancy.
Once again, while we sympathize with petitioners’ position,
the law is clear. The Commissioner’s allowance of a deduction on
a Federal income tax return for 1 year does not preclude him from
challenging a similar item in a return for a later year. S.
Chester Tube Co. v. Commissioner, 14 T.C. 1229, 1235 (1950);
Lozoff v. United States, 266 F. Supp. 966, 971 (E.D. Wis. 1967),
affd. 392 F.2d 875 (7th Cir. 1968). This holds true even where
the Commissioner has accepted a taxpayer’s prior returns without
examining them. Rountree v. Commissioner, T.C. Memo. 1968-165.
Moreover, the Commissioner has no affirmative duty to notify
taxpayers of noncompliance with statutory requirements. Sommer
v. Commissioner, T.C. Memo. 1983-196.
Furthermore, application of the estoppel doctrine in tax
cases must be rare, as “the policy in favor of an efficient
collection of the public revenue outweighs the policy of the
estoppel doctrine in its usual and customary context.” Nadler v.
Commissioner, T.C. Memo. 1992-383, affd. without published
opinion 993 F.2d 1533 (2d Cir. 1993). Equitable estoppel is
available as a defense only where the taxpayer can show that the
Commissioner’s representatives have committed fraud or unfair
conduct that the taxpayer relied on to his or her detriment.
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Edens v. Commissioner, T.C. Memo. 1974-309, affd. 549 F.2d 798
(4th Cir. 1976). Estoppel is generally inapplicable to prevent
the Commissioner from correcting a mistake of law. Auto. Club of
Mich. v. Commissioner, 353 U.S. 180, 183 (1957).
Accordingly, we cannot accept petitioners’ estoppel
argument. While petitioners may perceive unfairness in the
results of respondent’s actions, they have presented no evidence
that suggests respondent made any misrepresentations or
participated in any wrongful behavior. Thus, respondent is not
estopped from disallowing petitioners’ dependency exemption and
child tax credit for the taxable year 2003.
D. Actions of Third Party
Lastly, petitioners claim that this Court should overturn
respondent’s disallowance of the dependency exemption and child
tax credit, because the entire matter is a result of Mrs.
Norris’s claiming the dependency exemption on her 2003 joint
return. Petitioners base this argument on Mrs. Norris’s 1995
Form 8332, wherein she released her claim to the exemption for
all future years. They contend she knowingly violated this
release as retaliation for differences that arose between her and
Mr. Chamberlain over custody of their two children. While Mrs.
Norris’s refusal to set aside past grievances and abide by her
prior agreement may have contributed to the existence of the
instant dispute and petitioners’ unfortunate situation, this
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Court has no jurisdiction to resolve this underlying grievance.
To reflect the foregoing,
Decision will be entered
for respondent.