2014.10.28, Daily Articles

TIGER CHARITY DIRECTOR 'FABRICATED' DIVORCE CLAIMS AGAINST HUSBAND, JUDGE RULES

While every person deserves their day in court, it is terrifying to realize what some people decide to do with that day:

"Wife in a divorce action accused her husband of using money for the Save China’s Tigers charity as a personal piggy bank for him her, arguing that she was therefore entitled to a share of the £25 million assets. 'After a 25-day private hearing in the Family Division of the High Court, judge Sir Paul Coleridge sided with [husband], describing wife as a 'unreliable' liar who had 'become blinded by her desire for revenge.' He said this had led the 'very intelligent' 50-year-old estranged wife "to fabricate where she thinks it will assist her case'.  Ruling that there had been no improper use of funds, the judge also rejected the wife’s claims the charity was a 'sham or 'a money laundering operation'. His ruling means neither husband nor wife are entitled to any of the £25 million, which will instead be spent trying to save China’s endangered tigers."

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WHO TAKES THE CHILD TAX EXEMPTIONS WHEN THE DIVORCE DECREE IS SILENT

QUESTION:

"On my divorce decree (that was changed from what we mediated) stated that he was allowed to claim the children until they turned 18 and that's when support also ends.  My daughter turned 18 on May 26, 2013, so I claimed her.  She lives with me and always has.  He is trying to claim her as well.  Who will the IRS choose in this type of situation?   The letter states that if I feel I qualify, do nothing."

 ANSWER: 

"The IRS will generally follow tax law rather than the divorce decree. For divorced or separated parents or parents who live apart, the custodial parent, if eligible, or other eligible person who the child lived with for more than half the year, can claim head of household filing status, the credit for child and dependent care expenses, the exclusion for dependent care benefits, and the earned income credit. The non-custodial parent, if allowed by divorce decree or consent of the custodial parent on form 8332 or similar signed statement, can claim the dependency exemption and child tax credit. For post-2008 divorce decrees or agreements, form 8332 or similar signed statement is required. The child tax benefits cannot be split any other way.

You should do what the letter from the IRS asks you to do."

However, as one commenter astutely points out:

"There is another rule that might be in play in this situation if the age at which a child becomes an adult (emancipated child) is 18 in your state, as it is in most states. (in some states the age is different).

See IRS Pub 17 (http://www.irs.gov/publications/p17/ch03.html#en_US_2013_publink1000170876) examples 5 and 6 which basically say:

"Example 5—child emancipated in May.  -- When your son turned age 18 in May 2013, he became emancipated under the law of the state where he lives. As a result, he is not considered in the custody of his parents for more than half of the year. The special rule for children of divorced or separated parents does not apply. "

In other words, the rule that allows a parent that does not live with the child (the special rule for divorced or separated parents) to claim the exemption, ends when the child becomes an adult.  The concept of "custody" does not apply to an adult.   In order to claim the exemption under the special rule, the child must have been in the custody of at least one parent more than 1/2 the year.  Since the child turned 18 in May, the child was in the parents custody, less than 1/2 the year.

So, even with a signed 8332 form (or other document), the parent that did not physically live with the child more then 1/2 the year cannot claim the child if the child became an adult in May.   Only the parent where the child actually lived more than 1/2 the year can claim the dependent and all the benefits, they cannot be split."

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