[Federal Register Volume 73, Number 128 (Wednesday, July 2, 2008)]
[Rules and Regulations]
[Pages 37797-37804]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-15044]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[TD 9408]
RIN 1545-BD01


Dependent Child of Divorced or Separated Parents or Parents Who 
Live Apart

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Final regulations.

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SUMMARY: This document contains final regulations relating to a claim 
that a child is a dependent by parents who are divorced, legally 
separated under a decree of separate maintenance, or separated under a 
written separation agreement, or who live apart at all times during the 
last 6 months of the calendar year. The regulations reflect amendments 
under the Working Families Tax Relief Act of 2004

[[Page 37798]]

(WFTRA) and the Gulf Opportunity Zone Act of 2005.

DATES: Effective Date: These regulations are effective July 2, 2008.
    Applicability Date: For date of applicability, see Sec.  1.152-
4(h).

FOR FURTHER INFORMATION CONTACT: Victoria Driscoll (202) 622-4920 (not 
a toll-free number).

SUPPLEMENTARY INFORMATION:

Paperwork Reduction Act

    The collection of information contained in these final regulations 
has been reviewed and approved by the Office of Management and Budget 
in accordance with the Paperwork Reduction Act (44 U.S.C. 3507(d)) in 
connection with OMB Control Number 1545-0074. This control number is 
assigned to all information collections associated with individual tax 
returns (series 1040 and associated forms and schedules, and related 
regulatory information collections). Information collections associated 
with control number 1545-0074 are subject to annual public comment and 
approval by OMB in accordance with the Paperwork Reduction Act.
    The collection of information in these final regulations is in 
Sec.  1.152-4(e). The information will help the IRS determine if a 
taxpayer may claim a child as a dependent when the parents of the child 
are divorced or separated or live apart at all times during the last 
six months of a calendar year. The collection of information is 
required to obtain a benefit. An agency may not conduct or sponsor, and 
a person is not required to respond to, a collection of information 
unless the collection of information displays a valid control number 
assigned by the Office of Management and Budget.
    The information will be reported on IRS Form 8332, Release/
Revocation of Release of Claim to Exemption for Child by Custodial 
Parent, or successor form. The time needed to complete and file this 
form will vary depending on individual circumstances. The estimated 
burden for individual taxpayers filing this form is included in the 
estimates shown in the instructions for their individual income tax 
return.
    Comments concerning the accuracy of this burden estimate and 
suggestions for reducing this burden should be sent to the Internal 
Revenue Service, Attn: IRS Reports Clearance Officer, 
SE:W:CAR:MP:T:T:SP, Washington, DC 20224, and to the Office of 
Management and Budget, Attn: Desk Officer for the Department of the 
Treasury, Office of Information and Regulatory Affairs, Washington, DC 
20503.
    Books or records relating to a collection of information must be 
retained as long as their contents may become material in the 
administration of any internal revenue law. Generally, tax returns and 
return information are confidential, as required by 26 U.S.C. 6103.

Background

    This document contains final amendments to the Income Tax 
Regulations, 26 CFR part 1, relating to section 152(e) and the 
entitlement of divorced or separated parents or parents who live apart 
at all times during the last 6 months of the calendar year to claim a 
child as a dependent.
    On May 2, 2007, a notice of proposed rulemaking (REG-149856-03) was 
published in the Federal Register (72 FR 24192). Written and electronic 
comments responding to the notice of proposed rulemaking were received. 
A public hearing was requested and held on April 3, 2008, however, the 
hearing was adjourned after no speakers appeared. After consideration 
of all the comments, the proposed regulations are adopted as amended by 
this Treasury decision. The comments and revisions are discussed in the 
preamble.

Explanation of Revisions and Summary of Comments

1. Scope of Section 152(e)

a. Custodial Parent's Failure To Release Exemption
    For taxable years beginning before January 1, 2005, section 
152(e)(1) provided that a custodial parent generally was entitled to 
claim the dependency exemption. Thus, if (1) parents of a child were 
divorced, legally separated, or lived apart during the last 6 months of 
the taxable year, (2) the child was in the custody of one or both 
parents for more than one-half of the taxable year, and (3) the child 
received over one-half of the child's support during the calendar year 
from one or both parents, the child was treated as receiving over one-
half of the child's support from the custodial parent unless an 
exception applied. Section 152(e)(2) provided an exception treating the 
child as receiving over one-half of the child's support from the 
noncustodial parent if the custodial parent released the claim to the 
exemption.
    In contrast, as amended by WFTRA (Pub. L. 108-311, 118 Stat. 1166) 
for taxable years beginning after December 31, 2004, section 152(e) 
includes no general rule allowing the custodial parent to claim an 
exemption for a child. It provides that a child is treated as the 
qualifying child or qualifying relative of the noncustodial parent if 
(1) the parents are divorced, legally separated, or live apart during 
the last 6 months of the taxable year, (2) the child receives over one-
half of the child's support during the calendar year from one or both 
parents, (3) the child is in the custody of one or both parents for 
more than one-half of the calendar year, and (4) the custodial parent 
releases the claim to the exemption. Thus, under current section 
152(e), the custodial parent's release of the claim is not an exception 
to a general rule, but is a condition precedent to the application of 
section 152(e). The proposed regulations include an example 
illustrating that section 152(e) does not apply if the custodial parent 
does not release the claim, in which case entitlement to the exemption 
is determined under section 152(c) or (d).
    Commentators suggested that the final regulations should reverse 
the conclusion of this example. The commentators opined that the final 
regulations should interpret section 152(e) as if it included the pre-
WFTRA general rule and provide that the custodial parent is entitled to 
the exemption if the custodial parent does not release the claim. The 
final regulations do not adopt this suggestion because it is 
inconsistent with the language of section 152(e) as amended by WFTRA.
b. Definition of Custody
    Section 152(e) includes two provisions relating to the concept of 
``custody:'' (1) Section 152(e) applies only if a child is in the 
custody of one or both parents for over one-half of the calendar year; 
and (2) in the absence of a qualified pre-1985 agreement, the 
noncustodial parent may claim the exemption only if the custodial 
parent (defined as the parent having custody for the greater portion of 
the calendar year) releases the claim to the exemption. The proposed 
regulations do not define the term custody.
    The lack of a definition of the term custody in the proposed 
regulations may create ambiguity in determining whether section 152(e) 
applies. For example, a commentator suggested that the final 
regulations clarify whether a child who has attained the age of 
majority and is emancipated under state law is in the custody of one or 
both parents. The final regulations provide that a child is in the 
custody of one or both parents for more than one-half of the calendar 
year if one or both parents have the right under state law to physical 
custody of the child for more than one-half of the calendar year. 
However, a child is not in the custody

[[Page 37799]]

of either parent for purposes of section 152(e), for example, when the 
child reaches the age of majority under state law. See Boltinghouse v. 
Commissioner, T.C.M. 2007-324. The final regulations include an example 
that illustrates that a child is not in the custody of a parent after 
the child attains the age of majority and is emancipated under state 
law.
c. Application of Section 152(e) to Child Residing With Third Party
    Section 152(e)(1) provides that, if specified conditions are met, 
section 152(e) applies notwithstanding the principal place of abode 
test of section 152(c)(1)(B) and the tiebreaker rule of section 
152(c)(4) for a qualifying child, or the support test of section 
152(d)(1)(C) for a qualifying relative. A commentator requested that 
the final regulations clarify whether section 152(c), rather than 
section 152(e), applies when a child resides with someone other than a 
parent for more than one-half of the year because of a parent's lengthy 
absence. The final regulations include additional examples illustrating 
when section 152(e) applies to determine the right to claim a child as 
a dependent, and how the nights during which the child resides with a 
third party may be allocated to a parent.
d. Coordination of Section 152(e) and Other Provisions
    The proposed regulations provide that a child who is treated as the 
qualifying child or qualifying relative of a noncustodial parent under 
section 152(e) is treated as a dependent of both parents for purposes 
of sections 105(b), 132(h)(2)(B), and 213(d)(5). Consistent with the 
statutory language of those provisions, the final regulations clarify 
that, if section 152(e) does not apply, then this rule treating the 
child as a dependent of both parents does not apply. Thus, if a 
custodial parent does not release the claim to the exemption, only the 
taxpayer who is entitled to claim the child as a dependent under 
section 152(c) or (d) may treat the child as a dependent for purposes 
of sections 105(b), 132(h)(2)(B), and 213(d)(5).

2. Definition of Custodial Parent

    The proposed regulations define custodial parent as the parent with 
whom the child resides for the greater number of nights during the 
calendar year (the counting nights rule) and include rules for 
allocating nights when the child resides with neither parent.
a. Counting Nights Rule
    A commentator requested that the final regulations clarify that the 
counting nights rule applies to determine where a child resides under 
the tiebreaker rule of section 152(c)(4)(B) as well as to identify the 
custodial parent for purposes of section 152(e). The tiebreaker rule of 
section 152(c)(4)(B) is outside the scope of these regulations and 
therefore is not addressed.
    Commentators requested clarification of the term night for purposes 
of the counting nights rule. A commentator noted that the rule does not 
address how the child's residence for a night is determined (for 
example, by the child's physical location at a given time such as 
midnight, or by where the child sleeps) and for which year the night of 
December 31 to January 1 is counted.
    In response to this comment, the final regulations provide that, 
for purposes of section 152(e), a child resides for a night with a 
parent if the child sleeps (1) at the parent's residence (whether or 
not the parent is present), or (2) in the company of the parent when 
the child does not sleep at a parent's residence (for example, if the 
parent and child are on vacation). Under this rule, the time that a 
child goes to sleep is irrelevant. The final regulations provide that a 
night that extends over two taxable years is allocated to the taxable 
year when the night begins. Thus, the night that begins on December 31, 
2008, is counted for taxable year 2008.
    Commentators suggested that the counting nights rule may be 
inequitable in certain situations, for example if a parent works nights 
and cares for the child during the day, and the other parent works days 
and cares for the child at night. Under the counting nights rule, the 
parent who cares for the child at night is the custodial parent 
although the other parent may spend more time with the child. A 
commentator opined that the counting nights rule should create only a 
rebuttable presumption regarding which parent is the custodial parent.
    Defining custodial parent by means of a rebuttable presumption 
would add complexity and uncertainty and increase the potential for 
controversy. As a ``bright-line'' test, the counting nights rule is 
easy to understand and apply. The statute and regulations provide 
flexibility by allowing the custodial parent to release the claim to 
the exemption. Nonetheless, the final regulations allow an exception 
for cases in which a child resides for a greater number of days but not 
nights with a parent who works at night.
b. Allocation of Nights
    The proposed regulations provide that a child who resides with 
neither parent for a night is treated as residing with the parent with 
whom the child would have resided for the night but for the absence. 
However, if a child would not have resided with either parent (for 
example, because a court awarded custody of the child to a third party 
for the period of absence), the child is treated as not residing with 
either parent for the night of the absence.
    A commentator suggested that the final regulations omit the 
language ``for example'' and provide that an award of custody to a 
third party is the exclusive circumstance in which a night is not 
allocated to either parent. The final regulations do not incorporate 
this suggestion, as other situations may occur in which a child would 
not have resided with either parent for a night. However, the final 
regulations omit the parenthetical and illustrate this situation in the 
examples. Other commentators noted additional circumstances in which it 
would be difficult to determine the parent with whom a child would have 
resided for the night. Therefore, the final regulations provide that a 
night is not counted for either parent if the child would not have 
resided with either parent for the night or it cannot be determined 
with which parent the child would have resided for the night.
    Commentators requested that the final regulations address how 
nights are allocated in additional situations involving a child's 
absence. The final regulations provide additional examples in response 
to these comments.
    A commentator asked how a night is allocated in situations 
involving the absence of a parent, for example, if a child spends the 
night in a parent's residence in the care of a third party, but the 
parent is absent. Another commentator requested clarification on how a 
night is allocated if a child is scheduled to reside with one parent 
but, because of unexpected circumstances (such as that parent's 
unplanned absence) the child resides with the other parent for that 
night. These comments are addressed by the addition in the final 
regulations of the rule, discussed earlier in this preamble, that a 
child resides with a parent for a night if the child sleeps (1) at the 
residence of the parent (whether or not the parent is present), or (2) 
in the company of the parent, when the child does not sleep at a 
parent's residence.

3. Release of Exemption and Revocation of Release

a. Release of Claim to Exemption
    Section 152(e)(2) provides that a custodial parent may release a 
claim to an exemption for a child by signing a

[[Page 37800]]

written declaration that he or she will not claim the child as a 
dependent. The proposed regulations provide that the written 
declaration may be made on Form 8332, Release/Revocation of Release of 
Claim to Exemption for Child by Custodial Parent, or successor form, 
and any declaration not on Form 8332 must conform to the substance of 
that form. The proposed regulations also provide that a court order or 
decree may not serve as the written declaration.
    A commentator asserted that the final regulations should allow a 
noncustodial parent to claim a child as a dependent if a divorce decree 
allocates the exemption to that parent, whether or not the custodial 
parent releases the right to claim the child. Another commentator 
suggested that presumptions in favor of the custodial parent in the 
proposed regulations unfairly burden the noncustodial parent.
    A state court may not allocate an exemption because sections 151 
and 152, not state law, determine who may claim an exemption for a 
child for Federal income tax purposes. Section 152(e) provides for the 
unilateral release of an exemption by a custodial parent. Therefore, 
the final regulations do not adopt these comments.
    Commentators suggested that the final regulations should specify 
that a written separation agreement may not serve as the written 
declaration. One commentator recommended that the final regulations 
provide that the release must be on Form 8332 or that the release may 
be on either Form 8332 or a document that is executed for the sole 
purpose of releasing the claim. Other commentators opined, however, 
that the final regulations should provide specifically that a 
separation agreement that includes an unconditional release or a 
divorce decree may serve as a written declaration. A commentator 
suggested that a divorce settlement agreed to by both parents should 
determine the right to claim a child as a dependent without regard to 
which parent is the custodial parent and without requiring a separate 
written declaration.
    Divorce decrees, separation agreements, and similar instruments are 
complex documents that may be subject to differing interpretations 
governed by state law. Allowing these documents to serve as a written 
declaration creates complexity and uncertainty. Therefore, the final 
regulations retain the rule that a written declaration not on Form 8332 
(or successor form) must conform to the substance of Form 8332, and 
further provide that a release not on a Form 8332 must be a document 
executed for the sole purpose of releasing the claim. The final 
regulations provide specifically that a court order or decree or a 
separation agreement may not serve as the written declaration. These 
rules will improve tax administration and reduce controversy.
    The proposed regulations provide that if a release of a claim to a 
child is for more than one year, the noncustodial parent must attach 
the original written declaration to the parent's return for the first 
taxable year for which the release is effective and a copy of the 
written declaration for later years. A commentator requested that the 
final regulations allow a taxpayer to attach a copy of a declaration 
(rather than the original) to a tax return in the first year the 
release is effective as well as subsequent years. The final regulations 
adopt this comment.
b. Revocation of Release of Exemption
    Under the proposed regulations, Form 8332 or a substitute document 
may be executed for multiple years. Further, to provide flexibility to 
parents whose circumstances change, the proposed regulations allow a 
custodial parent to revoke a release, but the revocation may be 
effective no earlier than the taxable year that begins in the first 
calendar year after the calendar year in which the parent revoking the 
release provides notice of the revocation to the other parent. 
Commentators objected to the custodial parent's broad discretion to 
revoke a release under the proposed regulations. A commentator 
recommended that the final regulations provide that a taxpayer may 
revoke a release only if both parents agree. Section 152(e) provides 
for the unilateral release of an exemption by a custodial parent. The 
final regulations retain the rule allowing unilateral revocation by the 
custodial parent as consistent with the statute.
    A commentator suggested that a revocation should take effect in the 
taxable year that the parent signs the revocation. The final 
regulations do not adopt this comment, which could result in 
insufficient notice of the revocation to the noncustodial parent and 
increase controversies.
    The proposed regulations also provide that the taxpayer revoking 
the release must attach the original or a copy of the revocation to the 
taxpayer's tax return for any taxable year the taxpayer claims the 
exemption as a result of the revocation, and keep a copy of the 
revocation and evidence of delivery of written notice of revocation to 
the noncustodial parent. A commentator recommended that the final 
regulations require the custodial parent to send a copy of the written 
revocation to the noncustodial parent at the last known address or at 
an address reasonably calculated to ensure receipt. The commentator 
opined that proof of mailing by certified mail or other tracked 
delivery should suffice as evidence of notification. Another 
commentator expressed concern that a parent whose location is unknown 
may not receive notice of a revocation.
    To retain flexibility but increase the likelihood that a 
noncustodial parent will receive notice of a revocation, the final 
regulations require that the parent revoking the release notify, or 
make reasonable attempts to notify, in writing, the other parent of the 
revocation. What is a reasonable attempt is determined under the facts 
and circumstances, but mailing a copy of the written revocation to the 
noncustodial parent at the last known address or at an address 
reasonably calculated to ensure receipt satisfies this requirement.
    A commentator recommended that the final regulations provide that a 
release may be revoked only on a Form 8332. Consistent with the 
requirements for a release, the final regulations provide that (1) a 
revocation may be made on Form 8332, or successor form designated by 
the IRS, (2) a revocation not on the designated form must conform to 
the substance of the form and be in a document executed for the sole 
purpose of revoking a release, and (3) a taxpayer revoking a release 
may attach a copy rather than an original to the taxpayer's return for 
the first taxable year the revocation is effective, as well as for 
later years.
c. Releases Predating Applicability Date
    The proposed regulations do not address whether the rules for 
releasing a claim to an exemption and for revoking a release apply to a 
written declaration that is effective for multiple years and that was 
executed before the applicability date of the regulations. The final 
regulations apply prospectively, but clarify that a multiple year 
written declaration executed in a taxable year beginning on or before 
July 2, 2008, that satisfies the requirements for the form of a written 
declaration in effect at the time the written declaration is executed 
is treated as satisfying the requirements for the form of a release 
under the final regulations. However, the final regulations provide 
that the rules for revoking a release of a claim to an exemption apply 
without regard to whether a custodial parent executed the release in a 
taxable year beginning on or before July 2, 2008. Thus, a release 
executed in a taxable year beginning on or before July 2, 2008, may be 
revoked.

[[Page 37801]]

4. Effective/Applicability Date

    These final regulations apply to taxable years beginning after July 
2, 2008.

Special Analyses

    This Treasury decision is not a significant regulatory action as 
defined in Executive Order 12866. Therefore, a regulatory assessment is 
not required. Section 553(b) of the Administrative Procedure Act (5 
U.S.C. chapter 5) does not apply to these regulations and, because the 
regulations do not impose a collection of information on small 
entities, the Regulatory Flexibility Act (5 U.S.C. chapter 6) does not 
apply. Pursuant to section 7805(f) of the Code, the notice of proposed 
rulemaking that preceded these final regulations was submitted to the 
Chief Counsel for Advocacy of the Small Business Administration for 
comment on its impact on small business.

Drafting Information

    The principal author of these regulations is Victoria J. Driscoll 
of the Office of Associate Chief Counsel (Income Tax and Accounting). 
However, other personnel from the IRS and Treasury Department 
participated in their development.

List of Subjects in 26 CFR Part 1

    Income taxes, Reporting and recordkeeping requirements.

Amendment to the Regulations

0
Accordingly, 26 CFR part 1 is amended as follows:

PART 1--INCOME TAXES

0
Paragraph 1. The authority citation for part 1 is amended by adding an 
entry to read in part as follows:

    Authority: 26 U.S.C. 7805. * * *

    Section 1.152-4 also issued under 26 U.S.C. 152(e) * * *

0
Par. 2. Section 1.152-4 is revised to read as follows:


Sec.  1.152-4  Special rule for a child of divorced or separated 
parents or parents who live apart.

    (a) In general. A taxpayer may claim a dependency deduction for a 
child (as defined in section 152(f)(1)) only if the child is the 
qualifying child of the taxpayer under section 152(c) or the qualifying 
relative of the taxpayer under section 152(d). Section 152(c)(4)(B) 
provides that a child who is claimed as a qualifying child by parents 
who do not file a joint return together is treated as the qualifying 
child of the parent with whom the child resides for a longer period of 
time during the taxable year or, if the child resides with both parents 
for an equal period of time, of the parent with the higher adjusted 
gross income. However, a child is treated as the qualifying child or 
qualifying relative of the noncustodial parent if the custodial parent 
releases a claim to the exemption under section 152(e) and this 
section.
    (b) Release of claim by custodial parent--(1) In general. Under 
section 152(e)(1), notwithstanding section 152(c)(1)(B), (c)(4), or 
(d)(1)(C), a child is treated as the qualifying child or qualifying 
relative of the noncustodial parent (as defined in paragraph (d) of 
this section) if the requirements of paragraphs (b)(2) and (b)(3) of 
this section are met.
    (2) Support, custody, and parental status--(i) In general. The 
requirements of this paragraph (b)(2) are met if the parents of the 
child provide over one-half of the child's support for the calendar 
year, the child is in the custody of one or both parents for more than 
one-half of the calendar year, and the parents--
    (A) Are divorced or legally separated under a decree of divorce or 
separate maintenance;
    (B) Are separated under a written separation agreement; or
    (C) Live apart at all times during the last 6 months of the 
calendar year whether or not they are or were married.
    (ii) Multiple support agreement. The requirements of this paragraph 
(b)(2) are not met if over one-half of the support of the child is 
treated as having been received from a taxpayer under section 
152(d)(3).
    (3) Release of claim to child. The requirements of this paragraph 
(b)(3) are met for a calendar year if--
    (i) The custodial parent signs a written declaration that the 
custodial parent will not claim the child as a dependent for any 
taxable year beginning in that calendar year and the noncustodial 
parent attaches the declaration to the noncustodial parent's return for 
the taxable year; or
    (ii) A qualified pre-1985 instrument, as defined in section 
152(e)(3)(B), applicable to the taxable year beginning in that calendar 
year, provides that the noncustodial parent is entitled to the 
dependency exemption for the child and the noncustodial parent provides 
at least $600 for the support of the child during the calendar year.
    (c) Custody. A child is in the custody of one or both parents for 
more than one-half of the calendar year if one or both parents have the 
right under state law to physical custody of the child for more than 
one-half of the calendar year.
    (d) Custodial parent--(1) In general. The custodial parent is the 
parent with whom the child resides for the greater number of nights 
during the calendar year, and the noncustodial parent is the parent who 
is not the custodial parent. A child is treated as residing with 
neither parent if the child is emancipated under state law. For 
purposes of this section, a child resides with a parent for a night if 
the child sleeps--
    (i) At the residence of that parent (whether or not the parent is 
present); or
    (ii) In the company of the parent, when the child does not sleep at 
a parent's residence (for example, the parent and child are on vacation 
together).
    (2) Night straddling taxable years. A night that extends over two 
taxable years is allocated to the taxable year in which the night 
begins.
    (3) Absences. (i) Except as provided in paragraph (d)(3)(ii) of 
this section, for purposes of this paragraph (d), a child who does not 
reside (within the meaning of paragraph (d)(1) of this section) with a 
parent for a night is treated as residing with the parent with whom the 
child would have resided for the night but for the absence.
    (ii) A child who does not reside (within the meaning of paragraph 
(d)(1) of this section) with a parent for a night is treated as not 
residing with either parent for that night if it cannot be determined 
with which parent the child would have resided or if the child would 
not have resided with either parent for the night.
    (4) Special rule for equal number of nights. If a child is in the 
custody of one or both parents for more than one-half of the calendar 
year and the child resides with each parent for an equal number of 
nights during the calendar year, the parent with the higher adjusted 
gross income for the calendar year is treated as the custodial parent.
    (5) Exception for a parent who works at night. If, in a calendar 
year, due to a parent's nighttime work schedule, a child resides for a 
greater number of days but not nights with the parent who works at 
night, that parent is treated as the custodial parent. On a school day, 
the child is treated as residing at the primary residence registered 
with the school.
    (e) Written declaration--(1) Form of declaration--(i) In general. 
The written declaration under paragraph (b)(3)(i) of this section must 
be an unconditional release of the custodial parent's claim to the 
child as a dependent for the year or years for which the declaration is 
effective. A declaration is not unconditional if the custodial parent's 
release of the right to claim the child as

[[Page 37802]]

a dependent requires the satisfaction of any condition, including the 
noncustodial parent's meeting of an obligation such as the payment of 
support. A written declaration must name the noncustodial parent to 
whom the exemption is released. A written declaration must specify the 
year or years for which it is effective. A written declaration that 
specifies all future years is treated as specifying the first taxable 
year after the taxable year of execution and all subsequent taxable 
years.
    (ii) Form designated by IRS. A written declaration may be made on 
Form 8332, Release/Revocation of Release of Claim to Exemption for 
Child by Custodial Parent, or successor form designated by the IRS. 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 a separation agreement may not serve as a 
written declaration.
    (2) Attachment to return. A noncustodial parent must attach a copy 
of the written declaration to the parent's return for each taxable year 
in which the child is claimed as a dependent.
    (3) Revocation of written declaration--(i) In general. A parent may 
revoke a written declaration described in paragraph (e)(1) of this 
section by providing written notice of the revocation to the other 
parent. The parent revoking the written declaration must make 
reasonable efforts to provide actual notice to the other parent. The 
revocation may be effective no earlier than the taxable year that 
begins in the first calendar year after the calendar year in which the 
parent revoking the written declaration provides, or makes reasonable 
efforts to provide, the written notice.
    (ii) Form of revocation. The revocation may be made on Form 8332, 
Release/Revocation of Release of Claim to Exemption for Child by 
Custodial Parent, or successor form designated by the IRS whether or 
not the written declaration was made on a form designated by the IRS. A 
revocation not on that form must conform to the substance of the form 
and must be a document executed for the sole purpose of serving as a 
revocation under this section. The revocation must specify the year or 
years for which the revocation is effective. A revocation that 
specifies all future years is treated as specifying the first taxable 
year after the taxable year the revocation is executed and all 
subsequent taxable years.
    (iii) Attachment to return. The parent revoking the written 
declaration must attach a copy of the revocation to the parent's return 
for each taxable year for which the parent claims a child as a 
dependent as a result of the revocation. The parent revoking the 
written declaration must keep a copy of the revocation and evidence of 
delivery of the notice to the other parent, or of the reasonable 
efforts to provide actual notice.
    (4) Ineffective declaration or revocation. A written declaration or 
revocation that fails to satisfy the requirements of this paragraph (e) 
has no effect.
    (5) Written declaration executed in a taxable year beginning on or 
before July 2, 2008. A written declaration executed in a taxable year 
beginning on or before July 2, 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) of this section. Paragraph (e)(3) of this section 
applies without regard to whether a custodial parent executed the 
written declaration in a taxable year beginning on or before July 2, 
2008.
    (f) Coordination with other sections. If section 152(e) and this 
section apply, a child is treated as the dependent of both parents for 
purposes of sections 105(b), 132(h)(2)(B), and 213(d)(5).
    (g) Examples. The provisions of this section are illustrated by the 
following examples that assume, unless otherwise provided, that each 
taxpayer's taxable year is the calendar year, one or both of the 
child's parents provide over one-half of the child's support for the 
calendar year, one or both parents have the right under state law to 
physical custody of the child for more than one-half of the calendar 
year, and the child otherwise meets the requirements of a qualifying 
child under section 152(c) or a qualifying relative under section 
152(d). In addition, in each of the examples, no qualified pre-1985 
instrument or multiple support agreement is in effect. The examples are 
as follows:

    Example 1. (i) B and C are the divorced parents of Child. In 
2009, Child resides with B for 210 nights and with C for 155 nights. 
B executes a Form 8332 for 2009 releasing B's right to claim Child 
as a dependent for that year, which C attaches to C's 2009 return.
    (ii) Under paragraph (d) of this section, B is the custodial 
parent of Child in 2009 because B is the parent with whom Child 
resides for the greater number of nights in 2009. Because the 
requirements of paragraphs (b)(2) and (3) of this section are met, C 
may claim Child as a dependent.
    Example 2. The facts are the same as in Example 1 except that B 
does not execute a Form 8332 or similar declaration for 2009. 
Therefore, section 152(e) and this section do not apply. Whether 
Child is the qualifying child or qualifying relative of B or C is 
determined under section 152(c) or (d).
    Example 3. (i) D and E are the divorced parents of Child. Under 
a custody decree, Grandmother has the right under state law to 
physical custody of Child from January 1 to July 31, 2009.
    (ii) Because D and E do not have the right under state law to 
physical custody of Child for over one-half of the 2009 calendar 
year, under paragraph (c) of this section, Child is not in the 
custody of one or both parents for over one-half of the calendar 
year. Therefore, section 152(e) and this section do not apply, and 
whether Child is the qualifying child or qualifying relative of D, 
E, or Grandmother is determined under section 152(c) or (d).
    Example 4. (i) The facts are the same as in Example 3, except 
that Grandmother has the right to physical custody of Child from 
January 1 to March 31, 2009, and, as a result, Child resides with 
Grandmother during this period. D and E jointly have the right to 
physical custody of Child from April 1 to December 31, 2009. During 
this period, Child resides with D for 180 nights and with E for 95 
nights. D executes a Form 8332 for 2009 releasing D's right to claim 
Child as a dependent for that year, which E attaches to E's 2009 
return.
    (ii) Under paragraph (c) of this section, Child is in the 
custody of D and E for over one-half of the calendar year, because D 
and E have the right under state law to physical custody of Child 
for over one-half of the calendar year.
    (iii) Under paragraph (d)(3)(ii) of this section, the nights 
that Child resides with Grandmother are not allocated to either 
parent. Child resides with D for a greater number of nights than 
with E during the calendar year and, under paragraph (d)(1) of this 
section, D is the custodial parent.
    (iv) Because the requirements of paragraphs (b)(2) and (3) of 
this section are met, section 152(e) and this section apply, and E 
may claim Child as a dependent.
    Example 5. (i) The facts are the same as in Example 4, except 
that D is away on military service from April 10 to June 15, 2009, 
and September 6 to October 20, 2009. During these periods Child 
resides with Grandmother in Grandmother's residence. Child would 
have resided with D if D had not been away on military service. 
Grandmother claims Child as a dependent on Grandmother's 2009 
return.
    (ii) Under paragraph (d)(3)(i) of this section, Child is treated 
as residing with D for the nights that D is away on military 
service. Because the requirements of paragraphs (b)(2) and (3) of 
this section are met, section 152(e) and this section apply, and E, 
not Grandmother, may claim Child as a dependent.
    Example 6. F and G are the divorced parents of Child. In May of 
2009, Child turns age 18 and is emancipated under the law of the 
state where Child resides. Therefore, in 2009 and later years, F and 
G do not have the right under state law to physical custody of Child 
for over one-half of the calendar year, and Child is not in the 
custody of F and G for over one-half of the calendar year. Section 
152(e) and this section do not apply, and

[[Page 37803]]

whether Child is the qualifying child or qualifying relative of F or 
G is determined under section 152(c) or (d).
    Example 7. (i) The facts are the same as in Example 6, except 
that Child turns age 18 and is emancipated under state law on August 
1, 2009, resides with F from January 1, 2009, through May 31, 2009, 
and resides with G from June 1, 2009, through December 31, 2009. F 
executes a Form 8332 releasing F's right to claim Child as a 
dependent for 2009, which G attaches to G's 2009 return.
    (ii) Under paragraph (c) of this section, Child is in the 
custody of F and G for over one-half of the calendar year.
    (iii) Under paragraph (d)(1) of this section, Child is treated 
as not residing with either parent after Child's emancipation. 
Therefore, Child resides with F for 151 nights and with G for 61 
nights. Because the requirements of paragraphs (b)(2) and (3) of 
this section are met, section 152(e) and this section apply, and G 
may claim Child as a dependent.
    Example 8. H and J are the divorced parents of Child. Child 
generally resides with H during the week and with J every other 
weekend. Child resides with J in H's residence for 10 consecutive 
nights while H is hospitalized. Under paragraph (d)(1)(i) of this 
section, Child resides with H for the 10 nights.
    Example 9. K and L, who are separated under a written separation 
agreement, are the parents of Child. In August 2009, K and Child 
spend 10 nights together in a hotel while on vacation. Under 
paragraph (d)(1)(ii) of this section, Child resides with K for the 
10 nights that K and Child are on vacation.
    Example 10. M and N are the divorced parents of Child. On 
December 31, 2009, Child attends a party at M's residence. After 
midnight on January 1, 2010, Child travels to N's residence, where 
Child sleeps. Under paragraph (d)(1) of this section, Child resides 
with N for the night of December 31, 2009, to January 1, 2010, 
because Child sleeps at N's residence that night. However, under 
paragraph (d)(2) of this section, the night of December 31, 2009, to 
January 1, 2010, is allocated to taxable year 2009 for purposes of 
determining whether Child resides with M or N for a greater number 
of nights in 2009.
    Example 11. O and P, who never married, are the parents of 
Child. In 2009, Child spends alternate weeks residing with O and P. 
During a week that Child is residing with O, O gives Child 
permission to spend a night at the home of a friend. Under paragraph 
(d)(3)(i) of this section, the night Child spends at the friend's 
home is treated as a night that Child resides with O.
    Example 12. The facts are the same as in Example 11, except that 
Child also resides at summer camp for 6 weeks. Because Child resides 
with each parent for alternate weeks, Child would have resided with 
O for 3 weeks and with P for 3 weeks of the period that Child is at 
camp. Under paragraph (d)(3)(i) of this section, Child is treated as 
residing with O for 3 weeks and with P for 3 weeks.
    Example 13. The facts are the same as in Example 12, except that 
Child does not spend alternate weeks residing with O and P, and it 
cannot be determined whether Child would have resided with O or P 
for the period that Child is at camp. Under paragraph (d)(3)(ii) of 
this section, Child is treated as residing with neither parent for 
the 6 weeks.
    Example 14. (i) Q and R are the divorced parents of Child. Q 
works from 11 PM to 7 AM Sunday through Thursday nights. Because of 
Q's nighttime work schedule, Child resides with R Sunday through 
Thursday nights and with Q Friday and Saturday nights. Therefore, in 
2009, Child resides with R for 261 nights and with Q for 104 nights. 
Child spends all daytime hours when Child is not in school with Q 
and Q's address is registered with Child's school as Child's primary 
residence. Q executes a Form 8332 for 2009 releasing Q's right to 
claim Child as a dependent for that year, which R attaches to R's 
2009 return.
    (ii) Under paragraph (d) of this section, Q is the custodial 
parent of Child in 2009. Child resides with R for a greater number 
of nights than with Q due to Q's nighttime work schedule, and Child 
spends a greater number of days with Q. Therefore, paragraph (d)(5) 
of this section applies rather than paragraph (d)(1) of this 
section. Because the requirements of paragraphs (b)(2) and (3) of 
this section are met, R may claim Child as a dependent.
    Example 15. (i) In 2009, S and T, the parents of Child, execute 
a written separation agreement. The agreement provides that Child 
will live with S and that T will make monthly child support payments 
to S. In 2009, Child resides with S for 335 nights and with T for 30 
nights. S executes a letter declaring that S will not claim Child as 
a dependent in 2009 and in subsequent alternate years. The letter 
contains all the information requested on Form 8332, does not 
require the satisfaction of any condition such as T's payment of 
support, and has no purpose other than to serve as a written 
declaration under section 152(e) and this section. T attaches the 
letter to T's return for 2009 and 2011.
    (ii) In 2010, T fails to provide support for Child, and S 
executes a Form 8332 revoking the release of S's right to claim 
Child as a dependent for 2011. S delivers a copy of the Form 8332 to 
T, attaches a copy of the Form 8332 to S's tax return for 2011, and 
keeps a copy of the Form 8332 and evidence of delivery of the 
written notice to T.
    (iii) T may claim Child as a dependent for 2009 because S 
releases the right to claim Child as a dependent under paragraph 
(b)(3) of this section by executing the letter, which conforms to 
the requirements of paragraph (e)(1) of this section, and T attaches 
the letter to T's return in accordance with paragraph (e)(2) of this 
section. In 2010, S revokes the release of the claim in accordance 
with paragraph (e)(3) of this section, and the revocation takes 
effect in 2011, the taxable year that begins in the first calendar 
year after S provides written notice of the revocation to T. 
Therefore, in 2011, section 152(e) and this section do not apply, 
and whether Child is the qualifying child or qualifying relative of 
S or T is determined under section 152(c) or (d).
    Example 16. The facts are the same as Example 15, except that 
the letter expressly states that S releases the right to claim Child 
as a dependent only if T is current in the payment of support for 
Child at the end of the calendar year. The letter does not qualify 
as a written declaration under paragraph (b)(3) of this section 
because S's agreement not to claim Child as a dependent is 
conditioned on T's payment of support and, under paragraph (e)(1)(i) 
of this section, a written declaration must be unconditional. 
Therefore, section 152(e) and this section do not apply, and whether 
Child is the qualifying child or qualifying relative of S or T for 
2009 as well as 2011 is determined under section 152(c) or (d).
    Example 17. (i) U and V are the divorced parents of Child. Child 
resides with U for more nights than with V in 2009 through 2011. In 
2009, U provides a written statement to V declaring that U will not 
claim Child as a dependent, but the statement does not specify the 
year or years it is effective. V attaches the statement to V's 
returns for 2009 through 2011.
    (ii) Because the written statement does not specify a year or 
years, under paragraph (e)(1) of this section, it is not a written 
declaration that conforms to the substance of Form 8332. Under 
paragraph (e)(4) of this section, the statement has no effect. 
Section 152(e) and this section do not apply, and whether Child is 
the qualifying child or qualifying relative of U or V is determined 
under section 152(c) or (d).
    Example 18. (i) W and X are the divorced parents of Child. In 
2009, Child resides solely with W. The divorce decree requires X to 
pay child support to W and requires W to execute a Form 8332 
releasing W's right to claim Child as a dependent. W fails to sign a 
Form 8332 for 2009, and X attaches an unsigned Form 8332 to X's 
return for 2009.
    (ii) The order in the divorce decree requiring W to execute a 
Form 8332 is ineffective to allocate the right to claim Child as a 
dependent to X. Furthermore, under paragraph (e)(1) of this section, 
the unsigned Form 8332 does not conform to the substance of Form 
8332, and under paragraph (e)(4) of this section, the Form 8332 has 
no effect. Therefore, section 152(e) and this section do not apply, 
and whether Child is the qualifying child or qualifying relative of 
W or X is determined under section 152(c) or (d).
    (iii) If, however, W executes a Form 8332 for 2009, and X 
attaches the Form 8332 to X's return, then X may claim Child as a 
dependent in 2009.
    Example 19. (i) Y and Z are the divorced parents of Child. In 
2003, Y and Z enter into a separation agreement, which is 
incorporated into a divorce decree, under which Y, the custodial 
parent, releases Y's right to claim Child as a dependent for all 
future years. The separation agreement satisfies the requirements 
for the form of a written declaration in effect at the time it is 
executed. Z attaches a copy of the separation agreement to Z's 
returns for 2003 through 2009.
    (ii) Under paragraph (e)(1)(ii) of this section, a separation 
agreement may not serve as a written declaration. However, under 
paragraph (e)(5) of this section, a written declaration executed in 
a taxable year beginning on or before July 2, 2008, that satisfies 
the requirements for the form of a written declaration in effect at 
the time the

[[Page 37804]]

written declaration is executed, will be treated as meeting the 
requirements of paragraph (e)(1) of this section. Therefore, the 
separation agreement may serve as the written declaration required 
by paragraph (b)(3)(i) of this section for 2009, and Z may claim 
Child as a dependent in 2009 and later years.
    Example 20. (i) The facts are the same as in Example 19, except 
that in 2009 Y executes a Form 8332 revoking the release of Y's 
right to claim Child as a dependent for 2010. Y complies with all 
the requirements of paragraph (e)(3) of this section.
    (ii) Although Y executes the separation agreement releasing Y's 
right to claim Child as a dependent in a taxable year beginning on 
or before July 2, 2008, under paragraph (e)(5) of this section, Y's 
execution of the Form 8332 in 2009 is effective to revoke the 
release. Therefore, section 152(e) and this section do not apply in 
2010, and whether Child is the qualifying child or qualifying 
relative of Y or Z is determined under section 152(c) or (d).

    (h) Effective/applicability date. This section applies to taxable 
years beginning after July 2, 2008.


Sec.  1.152-4T  [Removed]

0
Par. 3. Section 1.152-4T is removed.

Linda E. Stiff,
Deputy Commissioner for Services and Enforcement.
     Approved: June 23, 2008.
Eric Solomon,
Assistant Secretary of the Treasury (Tax Policy).
 [FR Doc. E8-15044 Filed 7-1-08; 8:45 am]
BILLING CODE 4830-01-P