She is the custodial parent, he is your step-son/son on the tax return, so unless your wife is planning to waive the exemption to his father you would answer the questions like you are his father and the Form 8332 will not apply.
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Explanation of Form
8332: If you are the custodial parent, you can use this form to do the following. Release a claim to exemption for your child so that the noncustodial parent can claim an exemption for the child. Revoke a previous release of claim to exemption for your child.
If you are planning to release or waive the exemption so that the father can claim the child, then this form should printed out, completed and signed by the custodial parent and given to the noncustodial parent so that they can claim the child's exemption.
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Note: The child is still listed on your return because only the custodial parent is allowed certain credits (child care, earned income credit as example). The only credit that would go to the noncustodial parent is the Child Tax Credit.
