Thursday, February 13, 2003
Scott David Duby divorced his wife in 1997. Divorce decree grant wife sole custody of the 3 kids, but gave Scott visitation rights. It also stated that if Scott paid all his child support, wife is directed to sign the appropriate forms giving tax exemption for two of the kids to Scott. Subsequently, wife joins a cult and abducts the kids to Mexico. Tax Court, afraid to make a tax case the least bit interesting, hides that fact in a footnote. Scott asked state court to grant him sole custody. A hearing was held on July 1, 1999, and wife did not show. On September 10, 1999, state court issued decree granting sole custody to Scott, effective July 27, 1999. Scott claimed the exemption for all 3 kids for 1999. Scott never had physical custody, nor did he attach a waiver signed by wife. IRS disallowed, and now Tax Court is deciding.
The Rules: For divorced parents, if one or both parents provided over half the support for the kid, the parent with custody for the largest portion of the year gets the exemption. Custody is determined by the divorce decree or the latest custodial decree, not by physical custody. The non-custodial parent may claim the exemption if they attach to the return a waiver of the exemption signed by the custodial parent. Tax Court does not have jurisdiction to save children or compensate you for poor matrimonial judgement.
Held: By the divorce decree, wife was custodial parent at the beginning of 1999. By subsequent custodial decree, Scott became custodial parent beginning July 27, 1999. Therefor, wife had custody the greater portion of the year. Thus, under federal tax rules, wife was the custodial parent entitled to all three exemptions for 1999. As Scott attached no waiver signed by wife, he is ineligible to claim the exemption as a non-custodial parent.
All very logical. One problem. In a footnote, Tax Court acknowledges, �The parties filed a Stipulation of Facts stating that the change of custody took place on July 1, 1999.� As July 2 is the middle of a year, accepting this stipulation would, by Tax Court�s logic, throw the case to Mr. Duby. Tax Court says they do not ignore a stipulation �lightly�, but cited a case they claim gives them the power to do so when the stipulation appears contrary to facts disclosed by the record. I would agree that such dismissal should be done lightly, as it undermines the security of signing a stipulation, and therefor also undermines the incentive to do so. Frankly, dismissing a stipulation in a footnote seems pretty �light� to me. Unfortunately Mr. Duby appeared pro se, and the amount in issue is �only� $2,310.00. While this may be a big chunk of change for Mr. Duby, it will not make it worth hiring the attorney he needs to review the cases cited by Tax Court to see if he is being screwed by their dismissal of the stipulation.