Case Study

Oswald and Harriet Lewis were married on January 1. 2007 In 2009, their only child Zoe was born. Unfortunately, they did not live happily ever after and were divorced in 2012 They did not remain friends, but agreed to raise Zoe to the best of their abilities. Oswald is a dentist and makes a very good living Harriet is a waitress at Chili's and makes a modest living.

Pursuant to their divorce decree, Harriet was awarded custody of Zoe. The divorce decree required Oswald to pay child support of $1,500 per month until Zoe was age 18. The decree also provided that if Oswald timely paid the child support, he would be entitled to claim Zoe as a dependent on his tax return. If the payments were made, Harriet was required to release the dependency exemption to Oswald.

Specifically, their divorce decree states:

Section 3.01 - Harriet is awarded custody of Zoe who shall live in her household for the entire year. Oswald will have visiting rights every other Saturday until Zoe reaches the age. of 18.

Section 3.02 - Oswald is required to pay child support of $1,500 per month on the first day of each month to Harriet on behalf of Zoe until Zoe shall reach the age of 18 years of age. If Zoe dies before age 18, no child support need be paid.

Section 3.03 - If Oswald shall pay child support of $1,500 per month on the first day of each month to Harriet on behalf of Zoe and if Oswald pays the whole amount ($18,000) for the year, then:

(a) Harriet agrees not to claim Zoe as a dependency exemption on her Federal or State tax return for the year for which the payments were made, and

(b) Harriet further agrees and is required to sign any required Federal or State tax form to release the dependency exemption to Oswald so that Oswald may claim Zoe on his own Federal or State tax return as a dependency exemption and any other tax benefit to which he may be entitled due to his child support payments.

(c) Furthermore, each year stands on its own as to whether Harriet is required to release the dependency exemption to Oswald based upon Oswald having made the complete child support payments for the year to which the dependency exemption or other tax benefit relates.

Oswald has come to you for advice. Specifically he wants to know whether he will be able to claim Zoe as his dependent on his 2014 Federal income tax return.

Required:

Prepare in good form a research memorandum to the file which covers the following issues which Oswald wants answers for:

1. Based upon the information above, can Oswald claim Zoe as a dependent on his 2014 Federal income tax return?

2. What effect does Harriet's letter have on Oswald's ability to claim be as a dependent on his 2014 Federal income tax return?

3. Can Oswald use the divorce decree to take Harriet to court to force her to sign a Form 8332?

In addition to the research memorandum, provide a research file indicating what sources you used for the memorandum as well as any important relevant primary authority which you located.