Opinion ID: 1690806
Heading Depth: 1
Heading Rank: 4

Heading: income tax deductions.

Text: Mother claims the court erred in refusing to reallocate all of the exemptions to her. [G]enerally, the dependency exemption for children of divorced taxpayers will go to the parent having custody of the child for the greater part of the year. Struck v. Struck, 417 N.W.2d 382, 382 (S.D.1987); 26 U.S.C.A. § 152(e)(1) (West 1988 & Supp.1991). There are three exceptions to this general ruleonly one of which is applicable in this case. This exception, § 152(e)(4), states: (4) Exception for certain pre-1985 instruments. (A) In general.A child of parents described in paragraph(1) shall be treated as having received over half his support during a calendar year from the noncustodial parent if (i) a qualified pre-1985 instrument between the parents applicable to the taxable year beginning in such calendar year provides that the noncustodial parent shall be entitled to any deduction allowable under section 151 for such child, and (ii) the noncustodial parent provides at least $600 for the support of such child during such calendar year. .... . (B) Qualified pre-1985 instrument.For purposes of this paragraph, the term qualified pre-1985 instrument means any decree of divorce or separate maintenance or written agreement (i) which is executed before January 1, 1985, (ii) which on such date contains the provision described in subparagraph (A)(i), and (iii) which is not modified on or after such date in a modification which expressly provides that this paragraph shall not apply to such decree or agreement. Mother and Father were divorced in 1983. The decree was executed prior to January 1, 1985, and it provides that Father, the non-custodial parent, may take the dependency exemptions for all four children. Since then, Father provided at least $600 for the support of each child during each calendar year. Thus, the provisions of § 152(e)(4)(A) and § 152(e)(4)(B)(i) and (ii) are met. The remaining question is whether the 1988 modification to the 1983 decree constitutes a modification under § 152(e)(4)(B)(iii). In Davis v. Fair, 707 S.W.2d 711, 716 (Tex.App.-Eastland 1986), the Texas Court of Appeals explained § 152(e)(4)(B)(iii): Subsection (4)(B)(iii) merely gives a court the power to modify a pre-January 1, 1985, instrument which already contains a provision granting the noncustodial parent the right to any deduction allowable under Section 151 of the Internal Revenue Code. The purpose of subsection (4)(B)(iii) is to continue the force and effect of pre-amendment decrees which contain an express agreement relating to a noncustodial parent's right to claim the dependency exemption. Subsection (4)(B)(iii) does not give a court the power to modify a pre-amendment decree which is void of any agreement relating to a dependency exception. Absent an agreement in a pre-amendment decree, the exception provided in subsection (4) of Section 152(e) is not applicable. (emphasis added). We adopted a similar approach in Sarver v. Dathe, 439 N.W.2d 548, 551 (S.D.1989): A `Qualified pre-1985 instrument' is `any decree of divorce or separate maintenance or written agreement,' executed before January 1, 1985, which expressly allocates a deduction for the child in question to a non-custodial parent who provides at least $600 for support of that child, and which is not later changed in a modification expressly providing that `this paragraph' (the general rule) shall not apply. See also State, Fall River County v. Dryden, 409 N.W.2d 648, 652 n. 2 (S.D.1987). Therefore, a court may reduce the number of exemptions already given to a non-custodial parent without destroying a decree's qualified pre-1985 instrument status. The court's 1988 division of the exemptions is not a § 152(e)(4)(B)(iii) modification. Therefore, the modified divorce decree qualifies as a pre-1985 instrument under § 152(e)(4). Thus, Father fits the exception and the court did not err in refusing Mother the remaining two exemptions.