IRS creates "bright-line" test for counting child's nights in divorce situations

The IRS has issued final rules for determining which divorced or separated spouse may claim the dependency exemption of a child-in-common. Counting nights, the IRS explained, provides a "bright-line" test to determine which parent has custody for the greater part of a year. The final rules also reiterate that a court order or decree (or a separation agreement) is not a substitute for Form 8332, Release/Revocation of Release of Claim to Exemption for Child by Custodial Parent, or similar declaration.

The final rules provide that the custodial parent is the parent with whom the child resides for the greater number of nights during the calendar year. A child who is temporarily absent from a parent's home for a night would be treated as residing with the parent with whom the child would have resided for that night. A child resides for a night with a parent if the child sleeps:

• At the parent's residence (whether or not the parent is present); or
• In the company of the parent when the child does not sleep at the parent's residence.

Parent's absence. A parent may be absent because of military duty, a hospital stay, a business trip, or other reasons. The final regs include additional examples of how to allocate the nights during which a child resides with a third party, such as a grandparent.

Release. The declaration to release a claim to an exemption must be made on Form 8332 or similar document. A court order or decree (or a separation agreement) may not substitute for the declaration.