1.26 Ark. Code R. 51-801(d)(4)

Current through Register Vol. 49, No. 10, October, 2024

Rule 1.26-51-801(d)(4) - Dependent Defined

A person qualifies as a taxpayer's "dependent" only if all of the following provisions are met:

(a) Relationship test -- the person is *related to the taxpayer or is a member of the taxpayer's household. The person will be considered a member of the taxpayer's household if, for the taxpayer's entire tax year, the person had as his principle place of abode the home of the taxpayer;

b) The person's gross income does not equal or exceed the exemption amount. However, this gross income test does not apply to a child of the taxpayer who either:

i) has not reached the age of 19 at the end of the calendar year in which the taxpayer's tax year begins; or

ii) is a student who has not reached the age of 24 at the close of the calendar year.

c) Support test -- except for a divorced or separated parent claiming his child as a dependent, a taxpayer can claim a person as a dependent only if he furnishes more than 50% of such person's support during the calendar year in which the taxpayer's tax year begins. A taxpayer who provides at least 10% of a person's support under a multiple support agreement may also meet the "support" test. Refer to IRC Reg. 1.152-3. The support test for a child of divorced or separated parents is set forth in IRC Reg. 1.152-4 and 1.152-4T.

**Support funds can take many forms. However, where the claimed dependent is in an institution supported by a state, charity, etc., the amount spent by the institution on the claimed dependant is part of support and is treated as furnished by the institution.

d) The person does not file a joint return under certain conditions. A taxpayer cannot take a dependency exemption for a married person who files a joint return with his or her spouse for a tax year beginning in the same calendar year that the taxpayer's tax year begins. However, an exemption may be claimed for a married dependent if neither the dependent nor his or her spouse is required to file a return but they file only to claim a refund of all tax withheld.

e) To qualify as a dependent, at some time during the calendar year in which the tax year of the taxpayer begins, a person must be:

i) a citizen or resident of the United States;

ii) a resident of the Canal Zone, Panama, Canada or Mexico; or

iii) a "national" of the United States.

*Relationship test.

A person meets the relationship test only if he has one of the following relationships to the taxpayer:

* child or descendant of child;

* stepchild;

* brother, sister, by whole or half blood;

* stepbrother, stepsister;

* father, mother or ancestor of either (grandparent, great-grandparent, etc.);

* stepfather, stepmother;

* nephew, niece;

* brother or sister of father or mother (uncle, aunt);

* brother-, sister-, father-, mother-, son-, or daughter-in-law. IRC Reg. 1.151-3(a).

A child born alive qualifies for the full dependency exemption (if other tests are met) even if the child lives only momentarily.

A person is treated as the taxpayer's child if the person is:

* legally adopted by the taxpayer. IRC Reg. 1.152-2(c).

* a member of the taxpayer's household, and is placed with the taxpayer by an authorized placement agency for legal adoption by the taxpayer under a formal application filed with the agency -- the agency must be authorized to place children for adoption by a government or governmental subdivision (state, foreign country, etc.) IRC Reg. 1.152-2(c)(2).

* a foster child if he or she meets the "member of household" test. IRC Reg. 1.152-2(c)(4).

The relationship must exist with respect to the taxpayer claiming the dependency exemption on the taxpayer's separate return. On a joint return, the relationship need exist with respect to only one spouse, and it does not matter which spouse furnished the dependent's support.

These individuals do not meet the relationship test: taxpayer's grandnephew, grandniece, stepchild's descendant, aunt's husband, foster parent.

**Support test -- definition of support

Support includes:

* food, school lunches, toilet articles and haircuts;

* clothing;

* recreation, including toys, summer camp, horseback riding, entertainment and vacation expenses;

* medical and dental care, including premiums on accident and health insurance;

* child care expenses, even though a credit is also allowed for these expenses;

* allowances, gifts;

* son's or daughter's wedding costs;

* lodging -- when furnished in kind, it is measured by its fair market value rather than actual cost. IRC Reg. 1.152-1(a)(2).

* education -- these costs include board, uniforms at military schools, and tuition, even where free schooling is available. Scholarship payments received by a dependent are treated as support furnished by someone other than the taxpayer. However, scholarships are not counted in determining whether the taxpayer furnished more than fifty percent (50%) of the dependent's support if these tests are met:

i) the dependent is a child (including stepchild, foster child, or child adopted or placed for adoption) of the taxpayer, and

ii) is a full-time student at an educational institution. IRC Reg. 1.152-1(c);

* Social Security benefits received by a child and used for his support are considered provided by the child. IRC Reg. 1.152-1(a)(2)(ii);

* Armed Forces dependency allotments -- the amount contributed by the government and the amount withheld from the pay of the member of the Armed Forces are treated as contributed by the member.

1.26 Ark. Code R. 51-801(d)(4)