NONCUSTODIAL PARENT DENIED DEPENDENCY EXEMPTION DEDUCTIONS.

Frank W. Louis, for respondent.

GOLDBERG, Special Trial Judge: This case was heard pursuant to the provisions of section 7463 of the Internal Revenue Code in effect at the time the petition was filed. The decision to be entered is not reviewable by any other court, and this opinion should not be cited as authority. Unless otherwise indicated, subsequent section references are to the Internal Revenue Code in effect for the year in issue, and all Rule references are to the Tax Court Rules of Practice and Procedure.

Respondent determined a deficiency in petitioners' Federal income tax of $3,630 for the taxable year 2002.

The issue for decision is whether petitioners are entitled to claim dependency exemption deductions for David B. D'Amours, Jr., ND, and BD.¹

On August 22, 1981, petitioner David B. D'Amours (petitioner) and Teresa Marie Pond (Ms. Pond), petitioner's former wife, were married in Southwick, Massachusetts. During the marriage, petitioner and Ms. Pond had three children: David B. D'Amours, Jr., born in 1981, ND, born in 1987, and BD, born in 1990.

Petitioner and Ms. Pond were divorced in 1998.² Petitioner and Ms. Pond's divorce was granted on March 12, 1998, by a Judgment of Divorce Nisi. A Marital Separation Agreement (separation agreement), which was incorporated into the Judgment of Divorce Nisi, was signed by petitioner and Ms. Pond on March 12, 1998. The separation agreement states, in pertinent part, as follows:

David B. D'Amours, Jr., attained the age of 21 prior to the end of taxable year 2002. During taxable year 2002, David B. D'Amours, Jr., was not enrolled in any educational courses and did not attend any educational institution.

During the year in issue, Ms. Pond was employed by Costco Wholesale. Costco Wholesale issued to Ms. Pond a Form W-2, Wage and Tax Statement, which reflected wages earned of $29,326.24.

On or about April 15, 2003, petitioners filed their Form 1040, U.S. Individual Income Tax Return, for the 2002 taxable year. Petitioners did not attach a Form 8332, Release of Claim to Exemption for Child of Divorced of Separated Parents, or any statement, waiver, or declaration conforming to the substance of Form 8332 to their 2002 Federal income tax return. Ms. Pond did not sign a Form 8332 or any statement or waiver stating that she was releasing her claim to the exemptions for ND and BD. In their 2002 return, petitioners claimed exemption deductions for David B. D'Amours, Jr., ND, and BD.

Respondent disallowed the claimed exemption deductions for David B. D'Amours, Jr., ND, and BD. Accordingly, respondent issued to petitioners a notice of deficiency determining a deficiency of $3,630 in petitioners' 2002 Federal income tax.

Moreover, deductions are a matter of legislative grace and are allowed only as specifically provided by statute. INDOPCO, Inc. v. Commissioner, 503 U.S. 79, 84 (1992); New Colonial Ice Co. v. Helvering, 292 U.S. 435, 440 (1934).

1. ND and BD

Section 151(a) authorizes deductions for the exemptions provided by that section. In particular, section 151(c)(1) provides an exemption for each of a taxpayer's dependents, as defined in section 152, who is a child of the taxpayer and who has not reached the age of 19 by the close of the taxable year. Sec. 151(c)(1)(B).

Section 152(a)(1) defines the term "dependent" to include a taxpayer's child, provided that more than half of the child's support was received from the taxpayer or is treated under section 152(e) as received from the taxpayer.

In the case of a child of divorced parents, section 152(e)(1) provides as a general rule that the child shall be treated as receiving over half of his or her support from the custodial parent. Section 1.152-4(b), Income Tax Regs., provides that custody "will be determined by the terms of the most recent decree of divorce" if there is one in effect.

Thus, in the present case, because Ms. Pond had legal custody as well as physical custody of ND and BD throughout 2002, she was the custodial parent in 2002, and petitioner was the noncustodial parent.

Section 152(e)(2) provides an exception to the general rule of section 152(e)(1). Pursuant to that exception, the child shall be treated as receiving more than half of his or her support from the noncustodial parent if:

The declaration required by section 152(e)(2)(A) must be made either on Form 8332 or on a statement conforming to the substance of that form. Id.; accord Miller v. Commissioner, 114 T.C. 184, 189 (2000), affd. sub nom. Lovejoy v. Commissioner, 293 F.3d 1208 (10th Cir. 2002). To meet the requirements of section 152(e)(2), the written declaration, if not made on the official form provided by the Internal Revenue Service (IRS), "shall conform to the substance of such form." Sec. 1.1524T(a), Q&A-3, Temporary Income Tax Regs., supra. The form provided by the IRS, Form 8332, calls for the following information: (1) The name of the child or children for whom an exemption claim is released; (2) the applicable tax year or years for which the claims are released; (3) the custodial parent's signature and the date of signature; (4) the custodial parent's Social Security number; (5) the noncustodial parent's name; and (6) the noncustodial parent's Social Security number. "The exemption may be released for a single year, for a number of specified years (for example, alternate years), or for all future years, as specified in the declaration." Sec. 1.1524T(a), Q&A-4, Temporary Income Tax Regs., 49 Fed. Reg. 34459 (Aug. 31, 1984).

In the present case, Ms. Pond, as the custodial parent, did not sign a Form 8332 or any written declaration or statement agreeing not to claim the exemptions for ND and BD, and no such form, declaration, or statement was attached to petitioners' return for the year in issue.

However, petitioner argues that the separation agreement in the Judgment of Divorce Nisi, which ended his marriage with Ms. Pond, by its terms grants him the right to claim ND and BD as dependents for Federal and State income tax purposes.

We note that even if the provision of the separation agreement regarding dependency exemptions is controlling in this case, Ms. Pond would be entitled to one dependency exemption due to the fact that she earned in excess of $20,000 in the taxable year 2002.

Although the separation agreement, by and through its own terms, provides that petitioner is entitled to a dependency exemption for one of the claimed minor dependents, it is well settled that State courts by their decisions cannot determine issues of Federal tax law. See Commissioner v. Tower, 327 U.S. 280 (1946); Kenfield v. United States, 783 F.2d 966 (10th Cir. 1986); Neal v. Commissioner, T.C. Memo. 1999-97; Nieto v. Commissioner, T.C. Memo. 1992-296.

We find that the separation agreement, in the present case, does not "conform to the substance" of Form 8332. See sec. 152(e)(2); see also sec. 1.152-4T(a), Q&A-3, Temporary Income Tax Regs., supra. Further, the separation agreement was not attached to petitioners' 2002 Federal income tax return.

Unfortunately, regardless of what is stated in the separation agreement, the law is clear that petitioner is entitled to the child dependency exemption for one of the minor children in 2002 only if he complied with the provisions of section 152(e)(2). Petitioner has failed in this regard. It follows, therefore, that the exception set forth in section 152(e)(2) does not apply and that the general rule of section 152(e)(1) does apply. Accordingly, petitioners are not entitled to deduct dependency exemptions for ND and BD for taxable year 2002. Sec. 152(e)(1); Miller v. Commissioner, supra.

2. David B. D'Amours, Jr.

David B. D'Amours, Jr., attained the age of 21 prior to the end of taxable year 2002. During taxable year 2002, David B. D'Amours, Jr., was not enrolled in any educational courses and did not attend any educational institution.

If a child has reached the age of majority and is considered emancipated under the laws of the Commonwealth of Massachusetts, neither parent will be considered to have "custody" of that child within the meaning of section 152(e)(1)(B). Ferguson v. Commissioner, T.C. Memo. 1994-114; see Kaechele v. Commissioner, T.C. Memo. 1992-457. A child reaches the age of majority in Massachusetts at 18 years of age. Mass. Ann. Laws ch. 231, sec. 85P (LexisNexis 2000). Once a child is considered emancipated under State law, section 152(e)(1) is inapplicable, and the general rule of section 152(a) is controlling.

As previously stated, section 152(a)(1) defines the term "dependent" to include a taxpayer's child, provided that more than half of the child's support was received from the taxpayer. "Support" includes "food, shelter, clothing, medical and dental care, education, and the like." Sec. 1.152-1(a)(2)(i), Income Tax Regs.

The Court notes that to claim David B. D'Amours, Jr., as a dependent, petitioners would have also had to show that David B. D'Amours, Jr.'s, gross income for the 2002 calendar year was less than the exemption amount of $3,000. Sec. 151(c)(1). As shown below, we find that petitioner has not carried his burden of proof in showing either the total support for David B. D'Amours, Jr., for taxable year 2002 or that he provided over one-half of that support as required under section 152(a); therefore, we need not, and do not, decide whether David B. D'Amours, Jr.'s gross income for the 2002 calendar year was less than the exemption amount of $3,000.

In determining whether an individual received more than one-half of his or her support from the taxpayer, there shall be taken into account the amount of support received from the taxpayer as compared to the entire amount of support which the individual received from all sources. Id. In other words, the support test requires the taxpayer to establish the total support costs for the claimed individual and that the taxpayer provided at least half of that amount. Archer v. Commissioner, 73 T.C. 963, 967 (1980); see Cotton v. Commissioner, T.C. Memo. 2000-333; Gulvin v. Commissioner, T.C. Memo. 1980-111, affd. 644 F.2d 2 (5th Cir. 1981); Toponce v. Commissioner, T.C. Memo. 1968-101. A taxpayer who cannot establish the total amount of support costs for the claimed individual generally may not claim that individual as a dependent. Blanco v. Commissioner, 56 T.C. 512, 514-515 (1971); Cotton v. Commissioner, supra.

Petitioner testified that David B. D'Amours, Jr., resided with Ms. Pond during taxable year 2002. Petitioner further testified that he provided some support for David B. D'Amours, Jr. However, petitioner did not testify as to any specific amounts of support given to David B. D'Amours, Jr., or to the total annual cost of support for David B. D'Amours, Jr. Petitioner has not carried his burden of proof in showing either the total support for David B. D'Amours, Jr., for taxable year 2002 or that he provided over one- half of that support as required under section 152(a). Therefore, petitioner is not entitled to deduct a dependency exemption for David B. D'Amours, Jr. Respondent's determination is sustained.

Reviewed and adopted as the report of the Small Tax Case Division.

Decision will be entered for respondent.

² After his divorce from Ms. Pond, petitioner married petitioner Sharon J. D'Amours on Oct. 9, 1999.

³ We interpret the quoted language as requiring the taxpayer's evidence pertaining to any factual issue to be evidence the Court would find sufficient upon which to base a decision on the issue in favor of the taxpayer. See Bernardo v. Commissioner, T.C. Memo. 2004-199.