Sunday, March 30, 2003
Was Amanda M. Beeghly the custodial parent of her daughter in 1997 and 1998? The original custody agreement from 1996 provided for an absurdly complicated and bizarre custody schedule that left most of the holidays up to informal agreement between the parents. This agreement apparently and unsurprisingly did not seem to work out, and was modified by court order on December 1, 1997 to just exchanging the kid every week, with specific exceptions for certain holidays. Tax Court assumed the agreement and order were controlling except as to the unspecified holidays under the agreement. Tax Court appears to have punished some insolent law clerk by giving them the custody agreement, custody order, calendars of 1996, 1997, and 1998, and a few colored markers, and making them color in which days the papers gave physical custody to the mother, the father, and which were vague, and then making them count it out day by day. What Tax Court found was that in 1998, Beeghly had custody 182 days, the father 183 days, and in 1997, the father had custody 182 days, and Beeghly admitted in testimony the father had custody on at least one of the vague holidays, totaling 183 days for the father and leaving only 182 days for Beeghly. Thus Beeghly was not the �custodial parent� in either year. This caused her to lose the dependency exemption, which in turn caused her to lose the child tax credit, child care expense deductions, Head of Household filing status, and earned income credit.
When explaining the law with regard to the central issue in this case, Tax Court states:
Petitioner claims that she had �physical� custody of Shelby for a greater portion of each year in issue and proceeds (as does respondent for that matter) as though the actual, physical custody of Shelby must be determined on a day-by-day basis for each day of the years in issue. Presumably, petitioner�s position in this case is based upon the reference to �split custody� in the regulation. As petitioner construes the regulation, in a �split�, joint, or shared custody arrangement, the express terms of a custody instrument (written agreement or order) establishing legal and/or physical custody are, in effect, ignored and actual, physical custody must be determined even though the custody instrument specifically allocates physical custody of the child between parents for definite periods. We disagree and consider such a construction to be wholly inconsistent with the underlying rationale for section 152(e). See McClendon v. Commissioner, 74 T.C. 1, 3 (1980); Yancey v. Commissioner, 72 T.C. 37, 40 (1979); Knight v. Commissioner, T.C. Memo. 1992-710, affd. without published opinion 29 F.3d (9th Cir. 1994).
Isn�t amazing that both Beeghly and the IRS can be so confused about the law? They are not the only ones. Beeghly was issued on March 28, 2003. On March 25, 2003, Tax Court issued the Maher decision, in which they stated:
We have repeatedly held that we look to where the child resided to determine which parent had physical custody for purposes of section 152(e)(1). Neal v. Commissioner, T.C. Memo. 1999-97; Otmishi v. Commissioner, T.C. Memo. 1980-472; Dumke v. Commissioner, T.C. Memo. 1975-91, affd. without published opinion 524 F.2d 1230 (5th Cir. 1975); see also Meyer v. Commissioner, T.C. Memo. 2003-12; Horn v. Commissioner, T.C. Memo. 2002-290; Nieto v. Commissioner, T.C. Memo. 1992-296. Even if the custody decree grants physical custody to one parent, we have held that this parent is not entitled to a dependency exemption when the children did not live with this parent for most of the year. Otmishi v. Commissioner, supra; Dumke v. Commissioner, supra.