Child of Divorced or Separated Parents Will Be Treated As a Dependent of Both

IRS Provides Circumstances Under Which a Child of Divorced or Separated Parents Will Be Treated As a Dependent of Both (Rev. Proc. 2008-48)



The IRS has provided guidance regarding when a child of divorced or separated parents will be treated as a dependent of both parents. Under Code Sec. 152(e), a child of divorced or separated parents will only be treated as a dependent of the noncustodial parent for purposes of the dependency exemption only if the custodial parent provides a written declaration that he or she will not claim the child as a dependent for the tax year and the noncustodial parent attaches the declaration to his or her return. Many other provisions that provide for benefits and exclusions attributable to the dependents of a taxpayer reference the rules of Code Sec. 152, including its use in relation to the children of divorced or separated parents. However, under this procedure, the IRS will treat the child as a dependent of both parents for purposes of several provisions relating to medical expenses, medical coverage and employee benefits, regardless of whether or not the custodial parent released the claim of the exemption.



Specifically, the IRS will treat a child as a dependent of both parents, without a declaration of the custodial parent, under the following circumstances:



--the exclusion from gross income of certain employer reimbursements of expenses incurred for the medical care of the employee's child under Code Sec. 105(b);



--the exclusion from gross income of employer contributions to an accident or health plan on behalf of the employee's children under Code Sec. 106(a) and Reg. §1.106-1;



--the exclusion from gross income of fringe benefits qualifying as no-additional-cost services or qualified employee discounts under Code Sec. 132(a) that are treated as used by the employee due to use by an employee's child under Code Sec. 132(h)(2);



--the deduction of medical expenses of the taxpayer's child under Code Sec. 213(a); and



--the exclusions under Code Secs. 220(f)(1) and 223(f)(1) for distributions from Archer Medical Savings Accounts and Health Savings Accounts, respectively, if the distributions are used to pay qualified medical expenses of the account beneficiary's child.



The guidance is effective August 18, 2008, but taxpayers may choose to apply the guidance to any tax year beginning after December 31, 2004, for which a credit or refund can still be claimed under Code Sec. 6511.

Rev. Proc. 2008-48, 2008FED ¶46,544




Continue ->


Stephen Martinez

Tax Office