In two recent cases, the Tax Court ruled on the validity of a dependency exemption release to a noncustodial parent. Taken together, the cases illustrate how a properly executed and filed Form 8332, Release/Revocation of Release of Claim to Exemption for Child by Custodial Parent, is the key to releasing a claim of exemption and outweighs state court orders.
In Armstrong, the court denied the deduction and child tax credit to a noncustodial father who did not attach Form 8332 to his 2007 tax return. The taxpayer, Billy Armstrong, did attach a copy of an “arbitration award” indicating he would be entitled to the dependency exemption for one of his and his ex-wife’s two children if he stayed current with child support. Upon audit, he also provided a 2003 state court order that incorporated the arbitration award and a 2007 state court order signed by the ex-wife that explicitly required the ex-wife to provide him with an executed Form 8332 or its equivalent if his support payments were current, which they were. The IRS rejected his claim because the award and orders were conditioned upon current payment of child support. The majority opinion of the Tax Court agreed that the state court orders did not unconditionally declare that Armstrong’s ex-wife would not claim the exemption and therefore could not substitute for Form 8332.