Older son has the right to claim younger sibling as a dependent as long as they lived together more than half the year, AND the older son has more taxable income than both the custodial parent and step-parent. In that case, there is nothing you can do about it and your form 8332 is irrelevant. You can't claim anything. Whether the older son can also claim HOH status depends on whether the older son paid more than half of the total living expenses of the household. This requires an analysis that includes all the taxable and non-taxable income coming into the household including child support, disability payments, the older son's income, and any other state or charitable assistance to the family.
If the older son chooses to not claim the younger son as a dependent, then you can claim the younger son using the form 8332 release.
I believe the older son's claim (based on residency and the parent's income being lower than his) makes the form 8332 irrelevant. However, I am not a tax attorney. It is possible that, if the custodial parent waived the dependent to you, that choice (made by a parent) has priority over the ability of a sibling to claim a younger sibling. I'm not sure how the tiebreakers run. You may want to run the situation past an enrolled agent.
