I'm of the opinion that you don't need form 8332, for 2016, since the child lived with you for more than half the year. All you need is for your wife to not claim the child.
The conflict will come if more than one person tries to claim the child. It's not entirely clear how the IRS will rule. Normally, the "tie-breaker", for parents, is who the child lived with the most time. But, in this case, the IRS will probably rule for you, because she had no income and no reason to file a return. If the brother tries to claim the child, the IRS will rule for you because you are the parent (step parent counts) and the child lived with you more than half the year and did not live with the uncle at all.
The way it works, If two taxpayers try to claim the same child, and if they file first, your return will be rejected if e-filed. You would then need to file a return on paper, claiming the child as appropriate. The IRS will process your return and send you your refund, in the normal time. Shortly (up to a year) thereafter, you'll receive a letter from the IRS, stating that your child was claimed on another return. It will tell you that if you made a mistake to file an amended return and if you didn't make a mistake to do nothing. The other party will get the same letter you did. If one of you doesn't file an amended return, unclaiming the child, the next letter, from the IRS, will require you to provide proof.
