Dependents & College

[Opus 17]

Ok, the ultimate question is, where does it say "go back to the normal rules" when the child turns 18?

I finally found it in the regulations, even though it is not in the tax instructions or publications.  It's example 6 in section (g) here,

https://www.law.cornell.edu/cfr/text/26/1.152-4

Example 6.

F and G are the divorced parents of Child. In May of 2009, Child turns age 18 and is emancipated under the law of the state where Child resides. Therefore, in 2009 and later years, F and G do not have the right under state law to physical custody of Child for over one-half of the calendar year, and Child is not in the custody of F and G for over one-half of the calendar year. Section 152(e) and this section do not apply, and whether Child is the qualifying child or qualifying relative of F or G is determined under section 152(c) or (d).

That means go back to square 1, ignore everything else.

Since your daughters live at home with you, they are your qualifying relative dependents.  They must answer "yes" to the question "Can someone else claim me as a dependent."  If you don't want to claim them as dependents because you are income-limited on the AOTC, they can answer "no" to the second question "Will the person who could claim you actually claim you this year?"  They are disqualified from the recovery rebate but may get something on the AOTC.

Sorry for all the confusion, but at least I know where it actually says "go back to the standard rules" since it doesn't say that anywhere else I can find.

[Hal_Al]

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[Opus 17]

@Hal_Al That has seemed to be the case but I had never seen it in writing before, that the child defaults to the standard rules.  I found the code section finally, see above.  

[Hal_Al]

@Opus 17 said: "Since your daughters live at home with you, they are your qualifying relative dependents."

I think you meant to say Qualifying Child.

[macuser_22]

This has been discussed many time before.  It depend on 1) the age of emancipation in the state, usually 18 but some states are different, and 2)  the child DOB.  

If the 6 months living with the parent has passed before the date of emancipation then the divorced or separated parents rules are in affect because one parent did have "custody" more then 6 months.

But if the emancipation date is before 6 months passed then custody ends and nobody had custody more than 6 months.

[Opus 17]

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@macuser_22 wrote:

This has been discussed many time before.  It depend on 1) the age of emancipation in the state, usually 18 but some states are different, and 2)  the child DOB.  

If the 6 months living with the parent has passed before the date of emancipation then the divorced or separated parents rules are in affect because one parent did have "custody" more then 6 months.

But if the emancipation date is before 6 months passed then custody ends and nobody had custody more than 6 months.

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But that is not true if you look at the actual regulation, which I quote and link above.  This whole thread started because I was taking your line of thinking while the tax expert and @Hal_Al are taking the other line of thinking. Having found § 1.152-4(g), I'm convinced @Hal_Al and the expert are correct and you and I were wrong. 

The regulation clearly says that if the child is emancipated, Section 152(e) does not apply, and whether Child is the qualifying child or qualifying relative of the parents is determined under section 152(c) or (d).  Section 152(c) and (d) are the normal qualifying child and qualifying relative rules.  Under that interpretation, the children of the original taxpayer here are qualifying children of the taxpayer since they lived in the taxpayer's home.  Emancipation doesn't mean the child does not live with either parent, emancipation means that the special rules no longer apply and the child defaults to the normal rules. 

Your statement that... 

But if the emancipation date is before 6 months passed then custody ends and nobody had custody more than 6 months.

...would mean that a twenty year old student (more than 6 months since their 18th birthday) can't be the qualifying child of a parent even if they lived with the parent the entire year.  So your statement disagrees with the regulation.  (And note the regulation says, in the year the child turns 18 "and later years" dependency is determined under section 152(c) and (d). )

(Where this gets wonky is that the regulation, specifically § 1.152-4(g), Example 6, directly conflicts with IRS publication 501, example 6 on page 13.  When the regulation conflicts with the publication, the regulation wins, so I'm going to ignore that for now.)

[macuser_22]

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@Opus 17 wrote:

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The regulation clearly says that if the child is emancipated, Section 152(e) does not apply, and whether Child is the qualifying child or qualifying relative of the parents is determined under section 152(c) or (d).  Section 152(c) and (d) are the normal qualifying child and qualifying relative rules.  Under that interpretation, the children of the original taxpayer here are qualifying children of the taxpayer since they lived in the taxpayer's home.  Emancipation doesn't mean the child does not live with either parent, emancipation means that the special rules no longer apply and the child defaults to the normal rules. 

Your statement that... 

But if the emancipation date is before 6 months passed then custody ends and nobody had custody more than 6 months.

...would mean that a twenty year old student (more than 6 months since their 18th birthday) can't be the qualifying child of a parent even if they lived with the parent the entire year.  So your statement disagrees with the regulation.  (And note the regulation says, in the year the child turns 18 "and later years" dependency is determined under section 152(c) and (d). )

(Where this gets wonky is that the regulation, specifically § 1.152-4(g), Example 6, directly conflicts with IRS publication 501, example 6 on page 13.  When the regulation conflicts with the publication, the regulation wins, so I'm going to ignore that for now.)

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I don't thing there is any conflict in the regs.

Section 152(e) is the special rules that deal with custody.

Custody requires living with one parent more the  half the year (more then 183 nights) before the child becomes emancipated.  If that is the case then §152(e) applies.       If the 183 night test cannot be met because the child became emancipated then §152(e) does not apply.

That is what the examples in the publication say and so do the examples 6 & 7 in § 1.152-4(g).   Example 7(iii)"

(iii) Under paragraph (d)(1) of this section, Child is treated as not residing with either parent after Child's emancipation. Therefore, Child resides with F for 151 nights and with G for 61 nights. Because the requirements of paragraphs (b)(2) and (3) of this section are met, section 152(e) and this section apply, and G may claim Child as a dependent.

That example says that the parent that was NOT the custodial parent CAN claim the child because there was a 8332 agreement that is in effect because the child became emancipated after half the year rule was met.

Example 6 says bacaue the half the year custody rule was not met because the child became emancipated prior to the 6 months, then the 152(e) special 8332 rules no longer can app;y.

I think that is what I was saying.

[Opus 17]

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@macuser_22 wrote:

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What I am concerned by is your statement "But if the emancipation date is before 6 months passed then custody ends and nobody had custody more than 6 months."

To me, it sounds like you are saying that after emancipation, neither parent has custody and neither parent can claim the child as a QC dependent.  The regulation and example 6 in the regulation say that after emancipation, we fall back to the normal rules, which say that the parent in this case can claim their emancipated 20-year old college student children as dependents because they lived with the parent and meet the normal QC dependent rules.

Bottom line for this parent as far as § 1.152-4(g) is concerned, is that this parent can claim her 20-year old college-attending children as dependents because they lived with her more than half the year.

Separately, where there appears to be a conflict in the IRS documents between the examples in the regulation and the examples in pub 501, I think I should just drop that for now.  The different examples are similar, but the fact patterns are subtly different, and much more thought is required on my part.

[macuser_22]

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@Opus 17 wrote:

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@macuser_22 wrote:

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What I am concerned by is your statement "But if the emancipation date is before 6 months passed then custody ends and nobody had custody more than 6 months."

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That is true.   After emancipation NOBODY has "custody" any longer.   "Custody" only matters to apply the special rules that allows the non-custodial perent to claim the child if the custodial parent releases it with a 8332 form.   After emancipation the 8832 form no longer applies.     

Only the parent that physically lived with the child more than 6 months can claim as a qualifying child and they can not longer release it to the parent that did not live with the child.

[Hal_Al]

From a practical standpoint, what this simply  means is that if a child reaches 18 before July 2, the parent's are prohibited from using the special rule and if after July 1, they can use it.