TAX COURT OPINION

Case: Scott Michael Seeley
Docket Number: 18481-12S
Judge: Holmes
Opinion Type: bench
Filed: 06/11/2013
Pages: 9

UNITED STATES TAX COURT WASHINGTON, DC 20217 SCOTT MICHAEL SEELEY, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent ) ) ) ) ) ) ) ) ) O R D E R Docket No. 18481-12S. Pursuant to Rule 152(b), Tax Court Rules of Practice and Procedure, it is ORDERED that the Clerk of the Court shall transmit herewith to petitioner and to respondent a copy of transcript of Holmes at St. Paul, Minnesota, containing his oral fact and opinion rendered at was heard. the trial in the above case before Judge Mark V. findings of the trial session at which the case the pages of the In accordance with the oral findings of fact and opinion, a decision for Petitioner will be entered. (Signed) Mark V. Holmes Judge Dated: Washington, D.C. June 11, 2013 CO2m duN 1 2 2013 Capital Reporting Company 3 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 Bench Opinion by Judge Mark V. Holmes May 6, 2013 Scott Michael Seeley v. Commissioner Docket No. 18481-12S THE COURT: IN THE CASE OF SCOTT MICHAEL SEELEY V. COMMISSIONER, DOCKET NUMBER 18481-12S, 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. This Bench Opinion is made pursuant to the authority granted by section 7459(b) of the Internal Revenue Code of 1986, as amended, and Rule 152 of the Tax Court's Rules of Practice and Procedure. The stipulation in this case came about as .a result of an Order to Show Cause under Tax Court Rule 91(f), which I made absolute when Mr. Seeley did not respond, so that became the stipulation; and together with Mr. Seeley's testimony, which I generally find credible and passionate, constitutes the record in this case. The case concerns the 2009 tax year for Mr. Seeley, who was a Minnesota resident when he filed his petition. The origin of the case, however, goes much further back, into 2001, when Mr. Seeley divorced his 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 1 former wife. There were two kids produced during the 2 marriage, and his ex had physical custody of both. 4 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 However, under Paragraph 5 of their Divorce Decree, the tax deductions and other associated tax advantages for having minor children were split between the parties. Paragraph 5 of that Divorce Decree stated, "That the Petitioner [the ex-wife] is entitled to claim the minor child, RS, as a dependent for state and federal tax purposes, that the Respondent [Mr. Seeley] is entitled to claim the minor child, TS, as a dependent for state and federal tax purposes. At such time as there is only one child available to claim as a dependent, the parties shall alternate years claiming the remaining child, beginning with Petitioner claiming the child the first year." In the context of the Seeley family, that 19 meant that Mr. Seeley was entitled to, under the 20 21 22 23 24 25 Divorce Decree, to claim his daughter, his younger child, as a dependent and get other associated tax advantages in odd-numbered years beginning in 2005, because by that time, her older brother had reached the age of majority, and the passage of time guaranteed that, under this Divorce Decree, it was 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 5 1 certain that in those odd-numbered years, Mr. Seeley 2 would, under the Divorce Decree's terms, be entitled 3 4 5 6 7 8 9 to the tax advantages of claiming his daughter as a dependent on his own tax return. I note, specifically, that this provision in the Seeley's Divorce Decree was not conditional. It was also signed by his ex's attorney on her behalf, and it was dated by the Judge at the time it was signed. 10 Now, in general, a dependent has to live 11 with his or her parents; however, in the case of 12 13 14 15 16 17 18 19 20 21 22 23 24 25 divorced parents, there are special rules which determine which parent may claim a dependency exemption deduction for a child. Under section 152 (e) (1) and (2), "If the child receives over one half of the child's support during the calendar year from the child's parents who are divorced under Decree of Divorce and such child was in the custody of one or both of the child's parents for more than one half of the calendar year, and the custodial parent signs a written declaration that such custodial parent will not claim such child as a dependent for any taxable year beginning in such calendar year, and the non-custodial parent attaches such written declarations to the non-custodial 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 6 1 2 parent's return for the appropriate taxable year. This case is about whether the Seeleys' 3 Divorce Decree conforms to the substance -- is a 4 written declaration that the custodial parent has 5 6 7 8 9 signed transferring the dependency deduction that would otherwise go to her. The government's objection to Mr. Seeley's attempt to claim the dependency exemption in this case was, as articulated in the government's own 10 pretrial memo, that, "The Petitioner does not have a 11 Form 8332 or conforming document. Therefore, the 12 Petitioner cannot claim the minor child as a 13 14 15 dependent." So what I'm looking at very specifically here is one issue; whether the Divorce Decree that 16 Mr. Seeley provided the government is a document that 17 18 19 20 21 22 23 24 25 conforms to Form 8332, the IRS form that provides a safe harbor and is always a good idea to try to get, if one is a non-custodial parent trying to claim a dependency deduction from a custodial parent. IRS Form 8332 provides an effective and uniform way for a custodial parent to make the declaration required in section 152 (e) (2) (A)for the benefit of the non-custodial parent. But a non- custodial parent, like Mr. Seeley, may also rely on 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 7 1 2 3 an alternative document, again, as I said, providing it conforms to the substance of Form 8332. So the question is, did the Seeley's 4 Divorce Decree constitute a conforming document? 5 Well, what does that mean? In a case called Neal v. 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Commissioner, T.C. Memo. 1999-97., we summarized what was on the IRS Form 8332, and that provides a basis for talking about whether a Divorce Decree conforms to the substance of the 8332. In that case, we listed six things: 1: The names of the children; 2: The years for which the claims were released; 3: The signature of the custodial parent; 4: The Social Security Number of the custodial parent; 5: The date of the signature; 6: The name and Social Security Number of the parent claiming the exemption; in this case, of course, that would be Mr. Seeley, himself. But now, turn to the regulations that the IRS relies on. These regulations are also under section 152. It's pretty clear that if Mr. Seeley's Divorce Decree was entered into now rather than in 2001, he would lose. 26 CFR section 1.152- 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 8 1 2 3 4 5 6 4 (e) (1) (ii) states, "A written declaration not on the form designated by the IRS must conform to the substance of that form and must be a document executed for the sole purpose of serving as a written declaration under this section. A court order or decree or separation agreement may not serve as a 7 written declaration. So again, if that was the 8 9 10 11 12 13 14 15 16 17 18 language that applied here, Mr. Seeley would lose. However, 26 CFR section 1.152-4 (e) (5) states, "A written declaration executed in a taxable year beginning on or before July 2nd, 2008 that satisfies the requirements for the form of a written declaration in effect at the time the written declaration is executed will be treated as meeting the requirements of Paragraph (e) (1)." In other words, jaet that Mr. Seeley is relying on his Divorce Decree does not automatically disqualify him. I have to look to see whether the 19 Divorce Decree, which, of course, was in 2001, before 20 21 22 23 24 25 2008, conforms to 8332. So does it? Let's look at the requirements as summarized by Neal: Is the name of the child in the Divorce Decree? Yes. Is the year for which the exemption is 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 9 1 2 being transferred in the Divorce Decree? Yes. Did the Divorce Decree get signed by the 3 wife? Yes; through her attorney. An attorney can 4 5 act as agent for a spouse. The Social Security numbers are not in the 6 Divorce Decree, however, but although the 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Commissioner has claimed that an agreement doesn't conform to the substance of Form 8332 because it didn't include Social Security numbers, is an argument that we rejected in Boltinghouse v. Commissioner, T.C. Memo. 2003-134. We flatly rejected the assertion that Social Security numbers are required as without merit. The citation to that is T.C. Memo. 2003-134. Is the date of the signature on the Divorce Decree? Well, on page 13 of the Divorce Decree, there is the date of the signature of those who signed it. And then, in Armstrong v. Commissioner, 139 T.C. No. 18., issued just last year in December, we also held that the transfer of the dependency deduction must be unconditional and here, it's only the passage of time that changed the exemption from the former Mrs. Seeley to Mr. Seeley. This was not a conditional transfer, such as one that requires the 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 10 payment of child support from year to year. My conclusion, therefore, is that Mr. Seeley wins. And I, therefore, find for Petitioner that no deficiency is owed for tax year 2009. Congratulations, Mr. Seeley. MR. SEELEY: Thank you, sir. (Whereupon, at 6:15 p.m., the above- entitled matter was concluded.) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 866.488.DEPO www.CapitalReportingCompany.com