TAX COURT OPINION

Case: Clare A. Patten-Welsh & Michael J. Welsh
Docket Number: 18331-12
Judge: Buch
Opinion Type: bench
Filed: 01/14/2014
Pages: 5

Sob-608 UNITED STATES TAX COURT WASHINGTON, DC 20217 CLARE A. PATTEN-WELSH AND MICHAEL J. WELSH, Petitioners, v. ) ) Docket No. 18331-12. ) ) ) COMMISSIONER OF INTERNAL REVENUE, ) Respondent ) ) ) ORDER Pursuant to Rule 152(b), Tax Court Rules of Practice and Procedure, it is ORDERED that the Clerk of the Court shall transmit with this order to both petitioners and respondent a copy of the pages of the transcript of the trial in this case that contain the oral findings of fact and opinion that was rendered at the trial session at Phoenix, Arizona. In accordance with the oral findings of fact and opinion, decision will be entered for respondent. (Signed) Ronald L. Buch Judge Dated: Washington, D.C. January 14, 2014 SERVED JAN 1 6 2014 Capital Reporting Company 3 1 2 Bench Opinion by Judge Ronald L. Buch December 11, 2013 3 Clare A. Patten-Welsh & Michael J. Welsh 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 v. Commissioner Docket No. 18331-12 THE COURT: The Court has decided to render oral findings of fact and opinion in this case, and the following represents the Court's oral findings of fact and opinion. The oral findings of fact and opinion may not be relied upon as precedent in any other case. This opinion is in conformity with Internal Revenue Code section 7459(b) and Rule 152 (a) of the Tax Court Rules of Practice and Procedure. Any section references that follow refer to the Internal Revenue Code in effect during the years at issue, and Rule references are to the Tax Court Rules of Practice and Procedure. Background The parties have resolved all issues in this case other than those relating to whether petitioners may claim a dependency exemption in 2009 for KW, Mr. Welsh's son from a previous marriage. The operative facts are not in dispute. In connections with the dissolution of a previous marriage, Mr. Welsh was ordered to pay child 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 4 support, but his ex-wife retained custody of the children. In 2003, Mr. Welsh's child support payments were adjusted by Order of the Superior Court of Arizona, Maricopa County. That order provided that Mr. Welsh would be entitled to claim the dependency exemption for his son beginning in 2004. That Order also stated as follows: The Obligor's entitlement to the tax exemption shall be conditioned upon payment by December 31 of the total court-ordered child support obligation for the current calendar year... The current Mrs. Welsh testified that Mr. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 Welsh paid, and indeed overpaid, his child support. 15 16 17 18 Further, she noted that in 2004 through 2008, the IRS allowed Mr. Welsh to claim the dependency exemption, even after inquiry. Although it is unclear why the IRS changed its position, the IRS showed that Mr. 19 Welsh's ex-wife claimed the dependency exemption in 20 21 22 23 24 25 2009 for their son. Regardless, we note that the Supreme Court, just last week noteÕ that "An agency' s failure to assert a power, even if prolonged, cannot alter the plain meaning of a statute." United States v. Woods, 571 U.S. n.5 (Dec. 3, 2013). The law in this area is well settled. 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Section 151 allows a deduction for each personal exemption, which includes dependents. And someone who is a qualifying child may be a dependent. Sec. 152 (a) (1). Generally, a qualifying child must share a residence with the person claiming the dependency exemption. Section 152(c) (1) (B). But there is an exception to that general rule for divorced parents. See sec. 152(e). This is where we must look to determine whether Mr. Welsh may claim the dependency exemption for his son. Mr. Welsh is a non-custodial parent. A child of a noncustodial parent is a qualifying child only if the custodial parent signs a written declaration that she (in this case) will not claim the qualifying child and the noncustodial parent attaches that declaration to his (in this case) tax return. Sec. 152(e) (2). That declaration need not be on a particular form, but it has one very important criterium that is not satisfied in this case: it must be an unconditional release of the custodial parent's claim to the child as a dependent. Treas . Reg. Sec. 1.152-4 (e) (1) (i) . The regulation goes on to clarify that "A declaration is not unconditional if the custodial parent's release of the right to claim the child as a dependent requires 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 6 1 2 3 4 5 6 7 8 9 satisfaction of any condition, including the noncustodial parent's meeting of an obligation such as the payment of support." Ijl_. It is this specific provision that Mr. Welsh fails to meet. The child support modification order from 2003 contains an express condition. Because Mr. Welsh does not have an unconditional release, he may not claim his son as a dependent in 2009. 10 It is no doubt frustrating for Mr. and Mrs. 11 Welsh that they may not claim this dependency 12 13 14 15 16 exemption. It would appear that Mr. Welsh's ex-wife is not honoring the child support modification order. But we must apply the law as written. And because the Order made the allowance of the dependency exemption conditional, we cannot simply allow Mr. 17 Welsh the deduction without something else showing an unconditional release. (Whereupon, at 10:00 a.m., the above- entitled matter was concluded.) 18 19 20 21 22 23 24 25 866.488.DEPO www.CapitalReportingCompany.com