T.C. Summary Opinion 2005-28

UNITED STATES TAX COURT

JAMES T. AND REBECCA S. WERTHER, Petitioners v.

COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 16858-03S. Filed March 17, 2005.

James T. Werther, pro se.

Robert E. Marum, for respondent.

GOLDBERG, Special Trial Judge: This case was heard pursuant

to the provisions of section 7463 of the Internal Revenue Code in

effect at the time the petition was filed. The decision to be

entered is not reviewable by any other court, and this opinion

should not be cited as authority. Unless otherwise indicated,

subsequent section references are to the Internal Revenue Code in

effect for the year in issue.
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1The Court uses only the minor children’s initials.

Respondent determined a deficiency in petitioners’ Federal

income tax of $2,195 for the taxable year 2001.

The issues for decision are: (1) Whether petitioners are

entitled to two dependency exemption deductions for petitioner

James T. Werther’s two sons, RW and MW,1 from a previous

marriage; and (2) whether petitioners are entitled to a child tax

credit of $600 for taxable year 2001.

Some of the facts have been stipulated and are so found. 

The stipulation of facts and the attached exhibits thereto are

incorporated herein by this reference. Petitioners resided in

Danbury, Connecticut, on the date the petition was filed in this

case. James T. Werther (petitioner) appeared before the Court

and presented petitioners’ case. Petitioner wife, Rebecca S.

Werther, did not appear.

Background

On June 4, 1977, petitioner and Eileen M. Werther (Eileen)

were married. During the marriage, petitioner and Eileen had

four children: AW, born in 1979; JW, born in 1982; RW, born in

1984; and MW, born in 1985.

On April 13, 1993, Eileen and petitioner were divorced by an

order issued by the State of Louisiana in a divorce proceeding
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2After his divorce from Eileen, petitioner married Rebecca

S. Werther (petitioner wife).

initiated by petitioner.2 On September 20, 1994, Eileen and

petitioner entered into a final separation agreement covering

matters that were not addressed by the Louisiana order. Also on

September 20, 1994, a hearing was conducted before the Chittenden

Family Court, Chittenden County, State of Vermont. On October

12, 1994, the Chittenden Family Court entered a final order,

which incorporated matters covered in the final separation

agreement. Paragraph 1 of the final order provided: 

[Eileen] shall have the legal and physical parental rights 

and responsibilities of the parties’ following minor 

children: (a) [JW], (b) [RW], (c) [MW].

Paragraph 18 of the final order provided:

In future years [after 1993], the parties shall allocate the

children for dependency purposes in such manner as most 

reduces the overall tax burden of both parties, provided, 

however, that if Plaintiff [Eileen] incurs a greater tax 

liability than if she were to claim the three youngest 

children as dependents, Defendant [petitioner] shall make up

the difference to Plaintiff [Eileen] and pay her by April 

15th of that year.

On or about April 3, 2002, petitioners filed their Form

1040, U.S. Individual Income Tax Return, for the 2001 taxable

year. In their return, petitioners claimed RW and MW as their

dependents and claimed the resulting exemption deductions, as

well as a $600 child tax credit. There was no attachment

regarding any waiver or declaration, such as a Form 8332, Release

of Claim to Exemption for Child of Divorced or Separated Parents,
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3We decide the issues in this case without regard to the

burden of proof. Accordingly, we need not decide whether the

general rule of sec. 7491(a)(1) is applicable in this case. See

Higbee v. Commissioner, 116 T.C. 438 (2001).

executed by Eileen stating that she was releasing her claim to

exemption deductions for RW and MW.

During the 2001 taxable year, petitioners did not have

physical or legal custody of RW and MW. Eileen did not execute

or sign any waiver or declaration, such as Form 8332, stating

that she was releasing her claim to exemption deductions for RW

and MW. 

Respondent issued a notice of deficiency to petitioners in

which respondent disallowed petitioners’ claimed exemption

deductions for RW and MW for the 2001 taxable year, as well as

the child tax credit of $600.

Discussion3

A. Deductions for Dependency Exemptions

Section 151(a) authorizes deductions for the exemptions

provided by that section. In particular, section 151(c)(1)

provides an exemption for each of a taxpayer’s dependents as

defined in section 152.

Section 152(a)(1) defines the term “dependent” to include a

taxpayer’s child, provided that more than half of the child’s

support was received from the taxpayer or is treated under

section 152(e) as received from the taxpayer.
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In the case of a child of divorced parents, section

152(e)(1) provides as a general rule that the child shall be

treated as receiving over half of his or her support from the

custodial parent. Custody is determined by the terms of the most

recent decree of divorce or subsequent custody decree, and “will

be deemed to be with the parent who, as between both parents, has

the physical custody of the child for the greater portion of the

calendar year.” Sec. 1.152-4(b), Income Tax Regs. Thus, in the

present case, because Eileen had legal custody of RW and MW

throughout 2001 (as well as physical custody throughout the year)

she was the custodial parent in 2001, and petitioner was the

noncustodial parent.

Section 152(e)(2) provides an exception to the general rule

of section 152(e)(1). Pursuant to that exception, the child

shall be treated as receiving over half of his or her support

from the noncustodial parent if:

(A) the custodial parent signs a written declaration 

(in such manner and form as the Secretary may by regulations

prescribe) that such custodial parent will not claim such 

child as a dependent for any taxable year beginning in such 

calendar year, and 

(B) the noncustodial parent attaches such written 

declaration to the noncustodial parent’s return for the 

taxable year beginning during such calendar year.

See sec. 1.152-4T(a), Q&A-3, Temporary Income Tax Regs., 49 Fed.

Reg. 34459 (Aug. 31, 1984).
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The declaration required by section 152(e)(2)(A) must be

made on either the official form provided by the Internal Revenue

Service (IRS), Form 8332, or on a statement conforming to the

substance of that form. Miller v. Commissioner, 114 T.C. 184,

189 (2000), affd. sub nom. Lovejoy v. Commissioner, 293 F.3d 1208

(10th Cir. 2002). Form 8332 calls for the following information:

(1) The name of the child or children for whom an exemption claim

is released; (2) the applicable tax year or years for which the

claims are released; (3) the custodial parent’s signature and the

date of signature; (4) the custodial parent’s Social Security

number; (5) the noncustodial parent’s name; and (6) the

noncustodial parent’s Social Security number. “The exemption may

be released for a single year, for a number of specified years

(for example, alternate years), or for all future years, as

specified in the declaration.” Sec. 1.152-4T(a), Q&A-4,

Temporary Income Tax Regs., supra.

In the present case, Eileen, as the custodial parent, did

not sign Form 8332 or any written declaration or statement

agreeing not to claim exemption deductions for RW and MW, and no

such form, declaration, or statement was attached to petitioners’

return for the year in issue.

However, petitioner argues that in the past he has been

allowed the deduction and by not allowing the deduction in 2001

the IRS “broke its own precedent”. Upon the basis of the record
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and the applicable law, we disagree with petitioner’s argument. 

Every tax year stands by itself, and respondent’s prior action is

of no consequence here. Petitioner admits that he was the

noncustodial parent in 2001 and that Eileen did not execute a

written declaration, such as a Form 8332, indicating that she,

the custodial parent, would not claim exemption deductions for RW

and MW for the year 2001. Petitioner does not argue that he

attached any statement or written declaration to his and his

current wife’s 2001 joint tax return that would satisfy the

requirements of section 152(e)(2)(A).

Although the divorce decree, by and through its own terms,

provides the opportunity for petitioner to be entitled to

dependency exemptions for RW and MW, it is well settled that

State courts by their decisions cannot determine issues of

Federal tax law. See Commissioner v. Tower, 327 U.S. 280 (1946);

Kenfield v. United States, 783 F.2d 966 (10th Cir. 1986); Neal v.

Commissioner, T.C. Memo. 1999-97; Nieto v. Commissioner, T.C.

Memo. 1992-296. 

Unfortunately, regardless of what is stated in the State

divorce decree, the law is clear that petitioner is entitled to

the child dependency exemption in 2001 only if he complied with

the provisions of section 152(e)(2). Petitioner has failed in

this regard. It follows, therefore, that the exception set forth

in section 152(e)(2) does not apply and that the general rule of
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section 152(e)(1) does apply. Accordingly, petitioners are not

entitled to dependency exemption deductions for RW and MW for

2001. See sec. 152(e)(1); Miller v. Commissioner, supra. 

Respondent’s determination on this issue is sustained.

B. Child Tax Credit

Section 24(a) authorizes a child tax credit with respect to

each “qualifying child” of the taxpayer. The term “qualifying

child” is defined in section 24(c). As relevant here, a

“qualifying child” means an individual with respect to whom the

taxpayer is allowed a deduction under section 151. Sec.

24(c)(1)(A).

We have already held that petitioners are not entitled to

dependency exemption deductions under section 151 for RW and MW. 

Accordingly, RW and MW are not considered “qualifying children”

within the meaning of section 24(c). It follows, therefore, that

petitioners are not entitled to a child tax credit under section

24(a) with respect to RW and MW.

In view of the foregoing, we sustain respondent’s

determination on this issue.

Furthermore, we have considered all of the other arguments

made by petitioners, and, to the extent that we have not

specifically addressed them, we conclude they are without merit.
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Reviewed and adopted as the report of the Small Tax Case

Division.

Decision will be entered

for respondent.