The answer is both returns will be processed and sometime in the future a year or two from now the IRS will send out letters to both parties because you claim the same child on two returns and will request the non-custodial parent to amend their return to remove the child and send back the money they should not have gotten. This could become a slug fest and very ugly so your daughter should keep accurate records of exactly when the child stays with her and the other parent so she can defend her right to claim her own child in the future. Her only option this year is to mail in the return to assert proclaim to the child and the child related credits.
