                                           BILLY EDWARD ARMSTRONG AND PHOEBE J. ARMSTRONG,
                                                 PETITIONERS v. COMMISSIONER OF INTERNAL
                                                          REVENUE, RESPONDENT
                                                    Docket No. 28738–09.                   Filed December 19, 2012.

                                                  P–H was divorced, and his ex-wife had custody of their son
                                               C.E. A May 2003 arbitration award, a June 2003 State court
                                               order, and a March 2007 State court order provided that
                                               P–H would be entitled to the dependency exemption for C.E.
                                               (and the March 2007 order explicitly required his ex-wife to
                                               execute in his favor a Form 8332, ‘‘Release of Claim to
                                               Exemption for Child of Divorced or Separated Parents’’), on
                                               the condition that P–H pay child support for C.E. P–H paid
                                               the full amount of child support throughout 2007, but his ex-
                                               wife failed to provide the executed Form 8332. P–H
                                               remarried. Ps timely filed their joint 2007 Federal income tax
                                               return, attaching the May 2003 arbitration award. During an
                                               examination of that return, Ps also provided R with P–H’s
                                               2003 and 2007 child support orders, the latter signed by
                                               P–H’s ex-wife. R disallowed Ps’ claim for a dependency exemp-
                                               tion deduction for C.E. for tax year 2007. Held: As a sub-
                                               stitute for Form 8332, the State court order signed by P–H’s
                                               ex-wife (C.E.’s custodial parent) does not comply with I.R.C.
                                               sec. 152(e)(2)(A), because it fails to unconditionally declare
                                               that the ex-wife ‘‘will not claim such child as a dependent’’ for
                                               the year at issue.

                                       Billy Edward Armstrong and Phoebe J. Armstrong, for
                                     themselves.
                                       Lisa R. Woods, for respondent.
                                        GUSTAFSON, Judge: The Internal Revenue Service (IRS)
                                     determined a deficiency of $1,510 in the 2007 Federal income
                                     tax of petitioners Billy Edward Armstrong and Phoebe J.
                                     Armstrong and an accuracy-related penalty of $302 pursuant
                                     to section 6662. 1 The Armstrongs petitioned this Court,
                                     pursuant to section 6213(a), to redetermine the deficiency
                                     and the accompanying penalty. The case is now before the
                                     Court on the Commissioner’s unopposed motion to submit the
                                     case without trial on the basis of the parties’ stipulation of
                                     facts, pursuant to Rule 122. The issues for decision are
                                     whether the Armstrongs are entitled to a dependency exemp-
                                     tion deduction and a child tax credit for Mr. Armstrong’s son
                                       1 Unless otherwise indicated, all citations of sections refer to the Internal Revenue Code of

                                     1986 (26 U.S.C.) in effect for the tax year at issue, and all citations of Rules refer to the Tax
                                     Court Rules of Practice and Procedure.


                                     468




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                                     (468)                           ARMSTRONG v. COMMISSIONER                                      469


                                     for the tax year 2007, and, if not, whether the Armstrongs
                                     are liable for an accuracy-related penalty on the resulting
                                     deficiency. We conclude that the Armstrongs are not entitled
                                     to the deduction and the credit, but that they are not liable
                                     for the penalty.
                                                                              FINDINGS OF FACT

                                        Mr. Armstrong is a truck driver. He and his former wife
                                     Dawn Delaney divorced, and in 2003 the couple agreed to
                                     resolve by arbitration unspecified questions regarding the
                                     support of their two children. The children stayed in Ms.
                                     Delaney’s custody, but the arbitration resulted in a May 2003
                                     ‘‘Arbitration Award’’ that granted to Ms. Delaney the tax
                                     exemption for ‘‘C.W.’’ and to Mr. Armstrong the tax exemp-
                                     tion for ‘‘C.E.’’ 2 Under the arbitration award, Mr. Armstrong
                                     would get the dependency exemption for C.E. outright for tax
                                     years 2003 and 2004, but he would get it for later years,
                                     including 2007, only if he stayed current with child support.
                                     The arbitration award did not include a provision requiring
                                     Ms. Delaney to provide Mr. Armstrong with a Form 8332,
                                     ‘‘Release of Claim to Exemption for Child of Divorced or
                                     Separated Parents.’’ (As we will explain below, Form 8332 is
                                     the document by which a parent who does not have custody
                                     of a child may nonetheless become entitled to claim a
                                     dependency exemption deduction for the child.) In June 2003
                                     the Washington State court overseeing the divorce entered
                                     an ‘‘Agreed Order of Child Support on Arbitration’’ that
                                     incorporated this arbitration award and likewise did not
                                     require Ms. Delaney to give Mr. Armstrong a Form 8332.
                                        In March 2007, for reasons not in the record, the Wash-
                                     ington State court changed the June 2003 order. The March
                                     2007 order contained the following provision:
                                     3.17 INCOME TAX EXEMPTIONS.
                                     Tax exemptions for the children shall be allocated as follows:
                                     The Mother shall have the exemption for C[.W. and] the father shall have
                                     the exemption for * * * [C.E.], as long as the father is current with his
                                     child support obligation for the tax year involved.
                                     In reviewing whether or not the father is current, he must have made all
                                     twelve of the tax year’s child support payments by December 31st of that
                                     tax year.
                                           2 Pursuant   to Rule 27(a)(3) we refer to minor children by their initials.




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                                     470                 139 UNITED STATES TAX COURT REPORTS                                    (468)


                                     If payments are current, the mother shall provide the father for each enti-
                                     tled year with an executed IRS Form 8332 (Release of Claim to Exemption
                                     for Child of Divorced or Separated Parents) or its equivalent not later than
                                     January 31st of the year immediately following the year for which the tax
                                     exemption is to be claimed. The purpose of this provision is to ensure
                                     prompt and regular payment of the child support obligation; therefore,
                                     exemptions lost by failure to be current on child support payments cannot
                                     later be claimed or asserted by subsequent payment of back payments or
                                     arrears, nor claimed as a set-off for unpaid support. The parents shall sign
                                     the federal income tax dependency exemption waiver.
                                        [Emphasis altered.]

                                     Ms. Delaney signed the March 2007 order.
                                        By 2007 Mr. Armstrong had remarried. He had consist-
                                     ently made his child support payments required under the
                                     State court’s orders. But Ms. Delaney nonetheless failed to
                                     give him an executed Form 8332 for 2007. Lacking that form,
                                     the Armstrongs attached a copy of the 2003 arbitration
                                     award to their timely filed joint 2007 Federal income tax
                                     return.
                                        The IRS examined that 2007 return. During the course of
                                     the audit, the Armstrongs sent to the IRS copies of the 2003
                                     and 2007 child support orders, the latter of which had been
                                     signed by Ms. Delaney. The Commissioner nonetheless
                                     rejected the Armstrongs’ claim for a dependency exemption
                                     deduction and a child tax credit for C.E., because the award
                                     and orders were ‘‘condition[al]’’ upon Mr. Armstrong’s staying
                                     current with his support obligations. The IRS also determined
                                     an accuracy-related penalty. The Armstrongs timely peti-
                                     tioned this Court, and at that time they resided in South
                                     Dakota. The parties stipulated the facts and submitted the
                                     case for decision without trial.

                                                                                  OPINION

                                     I. Dependency exemption deduction claims under section 152
                                        An individual is allowed a deduction for exemption for
                                     ‘‘each individual who is a dependent (as defined in section
                                     152) of the taxpayer for the taxable year.’’ Sec. 151(c). Sec-
                                     tion 152(a) defines the term ‘‘dependent’’ to include ‘‘a quali-
                                     fying child’’. Generally, a ‘‘qualifying child’’ must: (i) bear a
                                     specified relationship to the taxpayer (e.g., be a child of the
                                     taxpayer), (ii) have the same principal place of abode as the
                                     taxpayer for more than one-half of such taxable year, (iii)




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                                     (468)                         ARMSTRONG v. COMMISSIONER                                     471


                                     meet certain age requirements, and (iv) not have provided
                                     over one-half of such individual’s support for the taxable year
                                     at issue. Sec. 152(c)(1). Under those provisions, Mr. Arm-
                                     strong could not claim C.E. as a dependent for 2007 because
                                     they did not have the same place of abode for more than one-
                                     half of the year.
                                        However, in the case of divorced parents, special rules
                                     determine which parent may claim a dependency exemption
                                     deduction for a child. See sec. 152(e); Espinoza v. Commis-
                                     sioner, T.C. Memo. 2011–108; cf. sec. 152(c)(4). Pursuant to
                                     section 152(e), when certain criteria are met, a child like C.E.
                                     may be treated as a qualifying child of the noncustodial
                                     parent (here, Mr. Armstrong) rather than of the custodial
                                     parent (Ms. Delaney). 3 Sec. 152(e)(1); 26 C.F.R. sec. 1.152–
                                     4T(a), Q&A–2, Temporary Income Tax Regs., 49 Fed. Reg.
                                     34459 (Aug. 31, 1984). C.E. could be the qualifying child of
                                     Mr. Armstrong, under section 152(e)(1) and (2), if—
                                        • The ‘‘child receives over one-half of the child’s support
                                     during the calendar year from the child’s parents * * * who
                                     are divorced * * * under a decree of divorce’’, sec.
                                     152(e)(1)(A);
                                        • such child was ‘‘in the custody of 1 or both of the child’s
                                     parents for more than one-half of the calendar year’’, sec.
                                     152(e)(1)(B);
                                        • ‘‘the custodial parent signs a written declaration (in such
                                     a manner and form as the Secretary may by regulations pre-
                                     scribe) that such custodial parent will not claim such child
                                     as a dependent for any taxable year beginning in such cal-
                                     endar year’’, sec. 152(e)(2)(A); and
                                        • ‘‘the noncustodial parent attaches such written declara-
                                     tion to the noncustodial parent’s return’’ for the appropriate
                                     taxable year, sec. 152(e)(2)(B).
                                     This case turns on whether Mr. Armstrong is able to show
                                     compliance with the third of these criteria 4—i.e., whether
                                       3 For these purposes, Ms. Delaney was C.E.’s custodial parent and Mr. Armstrong was C.E.’s

                                     noncustodial parent, because the State court orders gave Ms. Delaney sole custody of C.E. See
                                     sec. 152(e)(4); 26 C.F.R. sec. 1.152–4(b), Income Tax Regs.
                                       4 The Commissioner also argues that the Armstrongs are unable to show compliance with the

                                     fourth criterion—i.e., ‘‘attach[ing] such written declaration to the noncustodial parent’s re-
                                     turn’’—since the Armstrongs attached to their tax return only the May 2003 arbitration award,
                                     and not the March 2007 court order that Ms. Delaney actually signed. Since we are able to re-
                                     solve the case on the basis of the third criterion, we need not and do not reach this fourth cri-
                                                                                                  Continued




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                                     472                 139 UNITED STATES TAX COURT REPORTS                                    (468)


                                     Ms. Delaney ever signed a declaration that she ‘‘will not
                                     claim such child as a dependent’’.
                                        The IRS’s Form 8332 provides an effective and uniform way
                                     for a custodial parent to make the declaration required in
                                     section 152(e)(2)(A) for the benefit of the noncustodial parent.
                                     But a noncustodial parent like Mr. Armstrong may also rely
                                     on an alternative document, provided that it ‘‘conform[s] to
                                     the substance’’ of Form 8332. 5 See 26 C.F.R. sec. 1.152–
                                     4T(a), Q&A–3, Temporary Income Tax Regs., supra. In par-
                                     ticular, for tax years including the year at issue here, a court
                                     order that has been signed by the custodial parent may sat-
                                     isfy section 152(e)(2)(A) as the noncustodial parent’s declara-
                                     tion if the document ‘‘conform[s] to the substance’’ of Form
                                     8332. 6 See Briscoe v. Commissioner, T.C. Memo. 2011–165
                                     (concluding that the court order attached with the return did
                                     not conform with the substance of Form 8332); cf.
                                     Boltinghouse v. Commissioner, T.C. Memo. 2003–134 (holding
                                     a separation agreement conformed with the substance of
                                     Form 8332).
                                        A basic element necessary for satisfying section
                                     152(e)(2)(A) is a custodial parent’s declaration that she ‘‘will
                                     not claim’’ the child as a dependent for a taxable year. A
                                     custodial parent accomplishes this on a Form 8332 with the
                                     following statement: ‘‘I agree not to claim * * * for the tax
                                     year’’. This statement is unconditional; and in order for a
                                     document to comply with the substance of Form 8332 and
                                     ultimately section 152(e)(2)(A), the declaration on the docu-
                                     ment must also be unconditional. See Gessic v. Commis-
                                     sioner, T.C. Memo. 2010–88; Thomas v. Commissioner, T.C.
                                     Memo. 2010–11; Boltinghouse v. Commissioner, T.C. Memo.
                                     2003–134; Horn v. Commissioner, T.C. Memo. 2002–290.


                                     terion.
                                        5 Form 8332 requires a taxpayer to furnish: the name of the child; the name and Social Secu-

                                     rity number of the noncustodial parent claiming the dependency exemption deduction; the Social
                                     Security number of the custodial parent; the signature of the custodial parent; the date of the
                                     custodial parent’s signature; and the year(s) for which the claims were released.
                                        6 For taxable years starting after July 2, 2008, a court order signed by the custodial parent

                                     will not satisfy 26 C.F.R. section 1.152–4(e)(1)(ii), Income Tax Regs., as amended by T.D. 9408,
                                     2008–2 C.B. 323, 327 (‘‘A written declaration not on the form designated by the IRS must con-
                                     form to the substance of that form and must be a document executed for the sole purpose of
                                     serving as a written declaration under this section. A court order or decree or a separation
                                     agreement may not serve as a written declaration’’).




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                                     (468)                         ARMSTRONG v. COMMISSIONER                                          473


                                     II. The insufficiency of a custodial parent’s conditional release
                                        We assume here that Ms. Delaney’s signature on the
                                     March 2007 order constitutes, in effect, her declaration that
                                     she would comply with the order. Therefore, the critical ques-
                                     tion is whether, by declaring that she would comply with the
                                     March 2007 order, Ms. Delaney thereby declared that she
                                     ‘‘will not claim’’ C.E. as a dependent in 2007.
                                        That March 2007 order did not provide unconditionally
                                     that Ms. Delaney would not claim a dependency exemption
                                     deduction for C.E. or that she must sign Form 8332. Rather,
                                     the order unambiguously stated that her obligation to sign
                                     the release—and Mr. Armstrong’s right to the exemption—
                                     was conditional upon Mr. Armstrong’s payment of child sup-
                                     port. 7 This child support requirement appears nowhere in
                                     section 152(e), 8 of course; but the State court order affirmed
                                     this obligation in four ways, by providing—
                                        • that Mr. Armstrong would obtain the exemption (and
                                     that Ms. Delaney would release it) only ‘‘as long as the father
                                     is current with his child support obligation’’;
                                        • that entitlement to the exemption would require first a
                                     determination of ‘‘whether or not the father is current’’;
                                        • that Ms. Delaney would release her claim only ‘‘If pay-
                                     ments are current’’; and
                                        • that an exemption might be ‘‘lost by failure to be cur-
                                     rent’’. (Emphasis added.)
                                     That is, Mr. Armstrong would not obtain the exemption—and
                                     Ms. Delaney was not obligated to release it—if Mr. Arm-
                                     strong was not ‘‘current with his child support obligation’’; in
                                        7 Because the year at issue is 2007, this case is not governed by current 26 C.F.R. section

                                     1.152–4(e)(1)(i), Income Tax Regs., as amended by T.D. 9408, 2008–2 C.B. at 327, effective for
                                     tax years starting after July 2, 2008. That regulation states that ‘‘The written declaration * * *
                                     must be an unconditional release of the custodial parent’s claim to the child as a dependent for
                                     the year or years for which the declaration is effective. A declaration is not unconditional if the
                                     custodial parent’s release of the right to claim the child as a dependent requires the satisfaction
                                     of any condition, including the noncustodial parent’s meeting of an obligation such as the pay-
                                     ment of support.’’
                                        8 The statute itself does provide a ‘‘support’’ criterion that must be satisfied before a noncusto-

                                     dial parent may claim the dependency exemption deduction: The first of the four criteria listed
                                     above is that the child must receive over one-half of his support from his ‘‘parents’’ (without
                                     any distinction between the custodial parent and the noncustodial parent). See sec. 152(e)(1)(A).
                                     The statute does not condition a noncustodial parent’s entitlement to the exemption on his ful-
                                     fillment of child support obligations. Rather, under the statute the noncustodial parent may ob-
                                     tain the dependency exemption deduction as long as the parents together support the child, the
                                     child was in the custody of one or both of them for the year, the custodial parent executes a
                                     proper declaration, and the noncustodial parent attaches that declaration to his return.




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                                     474                 139 UNITED STATES TAX COURT REPORTS                                    (468)


                                     that case, the exemption was ‘‘lost’’ to Mr. Armstrong, not-
                                     withstanding the other terms of the order. By signing the
                                     order, Ms. Delaney effectively declared circumstances under
                                     which she would not release her claim but would instead
                                     report herself to be entitled to the dependency exemption for
                                     C.E.
                                        Therefore, in signing and assenting to the order, Ms.
                                     Delaney did not declare that she ‘‘will not claim such child
                                     as a dependent’’. Instead, she thereby declared that she will
                                     not claim C.E. as a dependent if Mr. Armstrong keeps cur-
                                     rent with support payments; but she also thereby unambig-
                                     uously declared that if he does not keep current, then she
                                     will claim the child as a dependent. This makes her declara-
                                     tion quite different from a declaration that she ‘‘will not
                                     claim such child as a dependent’’ for the year at issue. Sec.
                                     152(e)(2)(A). And to that extent, her conditional declaration
                                     is at odds with the statute, since ‘‘only a release that is
                                     unconditional conforms to the substance of Form 8332’’.
                                     Thomas v. Commissioner, T.C. Memo. 2010–11, slip op. at 9.
                                        Of course, Mr. Armstrong can point to the stipulated fact
                                     that, although the State court order was conditional, he ful-
                                     filled the condition: He did keep current with his support
                                     obligations, so that under the terms of the order, he was
                                     entitled to the exemption deduction and Ms. Delaney was
                                     obliged to execute the release. The question here, however, is
                                     not what he was entitled to under the State court order but
                                     what he is entitled to under section 152(e). See Miller v.
                                     Commissioner, 114 T.C. 184, 196 (2000) (‘‘Although the
                                     Permanent Orders granted * * * [the noncustodial parent]
                                     the right to claim the dependency exemptions for his chil-
                                     dren, a State court cannot determine issues of Federal tax
                                     law’’), aff ’d on other grounds sub nom. Lovejoy v. Commis-
                                     sioner, 293 F.3d 1208 (10th Cir. 2002).
                                        The drafters of section 152(e) removed from the equation
                                     the issue of proving support by the noncustodial parent. The
                                     statute requires a declaration that the custodial parent ‘‘will
                                     not claim’’ the child, sec. 152(e)(2)(A) (emphasis added); and
                                     where (as here) the noncustodial parent uses a substitute for
                                     Form 8332 from which the statutorily mandated declaration
                                     is missing, and the custodial parent declares instead that she
                                     may or may not claim the child, that defect is not cured by
                                     the noncustodial parent’s proof that he has fulfilled support




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                                     (468)                            ARMSTRONG v. COMMISSIONER                                     475


                                     conditions beyond those in the statute, see Brissett v.
                                     Commissioner, T.C. Memo. 2003–310 (compliance with terms
                                     of separation agreement not sufficient to authorize depend-
                                     ency exemption deduction without attaching valid Form 8332
                                     or equivalent).
                                        The record in this case illustrates the commonplace that
                                     custody and support orders are amended from time to time,
                                     and we have observed that ‘‘the Internal Revenue Service
                                     cannot be expected to police divorce decrees and separation
                                     agreements or determine taxpayer compliance therewith.’’
                                     See Gessic v. Commissioner, T.C. Memo. 2010–88, slip op. at
                                     8. Moreover, support obligations will sometimes consist of
                                     more than stated amounts of monthly payments; a support
                                     obligation may, for example, include health insurance cov-
                                     erage, the varying cost of which will in turn affect the
                                     amount of the cash payment otherwise due from the non-
                                     custodial parent. The question whether the noncustodial
                                     parent has fulfilled his obligations, though apparently easy
                                     in this instance, may be difficult and controversial in others.
                                     If that question had to be answered before one could deter-
                                     mine the proper claimant of the dependency exemption
                                     deduction, then section 152(e) would fail of its purpose. As
                                     we explained in Miller v. Commissioner, 114 T.C. at 195–196,
                                     Congress added the written declaration requirement to sec-
                                     tion 152(e) in 1984 to provide more certainty to the ‘‘often
                                     subjective and * * * difficult problems of proof and substan-
                                     tiation’’ that accompanied dependency exemption deduction
                                     disputes under the prior statutory scheme. H.R. Rept. No.
                                     98–432 (Part 2), at 1498 (1984), 1984 U.S.C.C.A.N. 697,
                                     1140. 9 Any rule by which Mr. Armstrong could prevail here
                                     would require us to revert to resolving those ‘‘difficult prob-
                                     lems of proof and substantiation’’ that we were supposed to
                                     leave behind with the prior scheme. We therefore hold that
                                     under section 152, C.E. is not a qualifying child of Mr. Arm-
                                     strong for tax year 2007; and as a result, Mr. Armstrong is
                                           9 The   House report stated:
                                       The present rules governing the allocations of the dependency exemption are often subjective
                                     and present difficult problems of proof and substantiation. * * * The committee wishes to pro-
                                     vide more certainty by allowing the custodial spouse the exemption unless that spouse waives
                                     his or her right to claim the exemption. Thus, dependency disputes between parents will be re-
                                     solved without the involvement of the Internal Revenue Service. [H.R. Rept. No. 98–432 (Part
                                     2), at 1498–1499 (1984), 1984 U.S.C.C.A.N. 697, 1140.]




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                                     476                 139 UNITED STATES TAX COURT REPORTS                                    (468)


                                     not entitled to the dependency exemption deduction for C.E.
                                     for 2007.
                                        Mr. Armstrong’s case is quite sympathetic: He was up to
                                     date on his child support; and under the State court order,
                                     Ms. Delaney was obliged to sign Form 8332 and release the
                                     exemption deduction to him. We are obligated, however, to
                                     follow the statute as written, whether the resulting dis-
                                     advantage is (as here) suffered by a noncustodial parent who
                                     bore the burden of child support but did not receive an
                                     executed Form 8332, or whether the disadvantage is suffered
                                     by a custodial parent who executed a Form 8332 but then
                                     bore an undue and unintended burden of child support.
                                     III. Child tax credit
                                       A taxpayer is entitled to a child tax credit for ‘‘each quali-
                                     fying child’’, as defined in section 152, who has not reached
                                     the age of 17. Sec. 24(a), (c)(1). Given our determination that,
                                     under section 152, C.E. is not a ‘‘qualifying child’’ of Mr.
                                     Armstrong for the year at issue, it follows that Mr. Arm-
                                     strong is not entitled to a child tax credit for C.E. for that
                                     year.
                                     IV. Accuracy-related penalty
                                           A. General principles
                                        Section 6662(a) and (b)(1) and (2) imposes an ‘‘accuracy-
                                     related penalty’’ of 20% of the portion of the underpayment
                                     of tax that is attributable to the taxpayer’s negligence or dis-
                                     regard of rules or regulations or that is attributable to any
                                     substantial understatement of income tax. By definition, an
                                     understatement of income tax for an individual is substantial
                                     if it exceeds the greater of $5,000 or 10% of the tax required
                                     to be shown on the return. Sec. 6662(d)(1)(A). Since the defi-
                                     ciency here is only $1,510, there was no ‘‘substantial under-
                                     statement’’, and the Armstrongs are liable for the penalty
                                     only if claiming the dependency exemption deduction for C.E.
                                     amounted to negligence.
                                        Under section 7491(c), the Commissioner bears the burden
                                     of production and must produce sufficient evidence that the
                                     imposition of the penalty is appropriate in a given case. Once
                                     the Commissioner meets this burden, the taxpayer must
                                     come forward with persuasive evidence that the Commis-




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                                     (468)                         ARMSTRONG v. COMMISSIONER                                     477


                                     sioner’s determination is incorrect. Rule 142(a); Higbee v.
                                     Commissioner, 116 T.C. 438, 446–447 (2001).
                                        For purposes of section 6662, the term ‘‘negligence’’
                                     includes a failure to exercise ordinary and reasonable care in
                                     the preparation of a tax return. 26 C.F.R. sec. 1.6662–3(b)(1),
                                     Income Tax Regs. Negligence is defined as a lack of due care
                                     or failure to do what a reasonable and ordinarily prudent
                                     person would do under the circumstances. Neely v. Commis-
                                     sioner, 85 T.C. 934 (1985). The term ‘‘disregard’’ includes any
                                     careless, reckless, or intentional disregard of the rules or
                                     regulations. Sec. 6662(c).
                                        A taxpayer who is otherwise liable for the accuracy-related
                                     penalty may avoid the liability if he successfully invokes one
                                     of two defenses pertinent here: 10 First, section 6662(d)(2)(B)
                                     provides that an understatement attributable to an item may
                                     be reduced where the relevant facts affecting the item’s
                                     treatment were adequately disclosed on his tax return and
                                     the taxpayer had a reasonable basis for his treatment of that
                                     item. Second, section 6664(c)(1) provides that, if the taxpayer
                                     shows, first, that there was reasonable cause for a portion of
                                     an underpayment and, second, that he acted in good faith
                                     with respect to such portion, then no accuracy-related pen-
                                     alty shall be imposed with respect to that portion.
                                           B. Application to this case
                                        Having kept up to date on his child support, Mr. Arm-
                                     strong knew that, under the State court order, he was enti-
                                     tled to receive Ms. Delaney’s release of the exemption for
                                     C.E. and to claim the dependency exemption deduction for
                                     himself. And he was indeed so entitled, under that order. He
                                     had in his possession a copy of one version of the court order
                                     to that effect that bore Ms. Delaney’s signature. Court orders
                                     can sometimes suffice as an equivalent to Form 8332; and
                                     since he lacked the Form 8332 to which he was entitled, Mr.
                                     Armstrong attached, to his tax return, a copy of a prior
                                     iteration of that order—i.e., the arbitration award. The
                                     arbitration award, like the later court order, explicitly dis-
                                     closed the conditionality of Ms. Delaney’s obligation to give
                                        10 Another potential defense does not appear to be implicated here: Section 6662(d)(2)(B) pro-

                                     vides that an understatement may be reduced where the taxpayer had substantial authority for
                                     his treatment of any item giving rise to the understatement. There is no authority that can be
                                     cited in support of the Armstrongs’ claim founded on Ms. Delaney’s conditional release.




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                                     478                 139 UNITED STATES TAX COURT REPORTS                                    (468)


                                     him the release (and the absence of her signature on that
                                     version of the document was evident).
                                       On these facts, we do not think that the Commissioner has
                                     borne his burden to show negligence. We do not believe that
                                     Mr. Armstrong, a truck driver, was sufficiently experienced
                                     in tax accounting and law such that he would realize that
                                     entitlement under the State court order to Ms. Delaney’s
                                     release did not necessarily mean entitlement under section
                                     152(e) to the dependency exemption deduction, a distinction
                                     that might not occur to many taxpayers.
                                       Moreover, if the Armstrongs’ reporting position had
                                     amounted to negligence, we think either or both of the
                                     defenses described above would excuse them from penalty, on
                                     the facts of this case: First, regarding section 6662(d)(2)(B),
                                     the facts underlying the Government’s position were cer-
                                     tainly disclosed on the tax return by the attachment of the
                                     arbitration award. And although Ms. Delaney’s release did
                                     not satisfy section 152(e), it was not unreasonable for Mr.
                                     Armstrong to believe that it did.
                                       Second, regarding section 6664(c)(1), whether the taxpayer
                                     acted with reasonable cause and in good faith depends on the
                                     pertinent facts and circumstances, including his efforts to
                                     assess his proper tax liability and his knowledge and experi-
                                     ence. 26 C.F.R. sec. 1.6664–4(b)(1), Income Tax Regs. The
                                     State court order and his compliance with it constituted
                                     reasonable cause to someone in his circumstance, and
                                     nothing in the record of this case suggests anything other
                                     than that he acted in good faith.
                                       Therefore, although we hold in favor of the Commissioner
                                     with regard to the tax deficiency, we hold in favor of the
                                     Armstrongs with regard to the penalty.
                                                                      Decision will be entered for respondent
                                                                   with regard to the deficiency and for peti-
                                                                   tioners with regard to the accuracy-related
                                                                   penalty.
                                       Reviewed by the Court.
                                       THORNTON, COLVIN, FOLEY, GALE, MARVEL, GOEKE,
                                     WHERRY, KROUPA, PARIS, MORRISON, and KERRIGAN, JJ.,
                                     agree with this opinion of the Court.




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                                     (468)                         ARMSTRONG v. COMMISSIONER                                     479


                                       GOEKE, J., concurring: The opinion of the Court narrowly
                                     focuses on the conditionality of the March 2007 order in
                                     determining that the document was insufficient to satisfy the
                                     section 152(e)(2) custodial parent release exception. The
                                     opinion of the Court’s analysis is cogent and accurate; how-
                                     ever, a noncustodial parent may validly claim a section 152
                                     dependency exemption only if he or she ‘‘attaches such writ-
                                     ten declaration to the noncustodial parent’s return for the
                                     taxable year beginning during such calendar year.’’ Sec.
                                     152(e)(2)(B) (emphasis added). Petitioners surrendered the
                                     March 2007 order during audit of their 2007 tax return.
                                     Clearly then, petitioners did not ‘‘attach’’ the relevant docu-
                                     ment to their return.
                                       Although the opinion of the Court considers the March
                                     2007 order, it acknowledges that—
                                     The Commissioner also argues that the Armstrongs are unable to show
                                     compliance with the fourth criterion—i.e., ‘‘attach[ing] such written dec-
                                     laration to the noncustodial parent’s return’’ [section 152(e)(2)(B)]—since
                                     the Armstrongs attached to their tax return only the May 2003 arbitration
                                     award, and not the March 2007 court order that Ms. Delaney actually
                                     signed. Since we are able to resolve the case on the basis of the third cri-
                                     terion [i.e., conditionality], we need not and do not reach this fourth cri-
                                     terion. [See op. Ct. note 4.]

                                     The dissent, however, addresses this issue that the opinion
                                     of the Court explicitly avoids. The dissent offers that the
                                     term ‘‘attach’’, as used in the statutory scheme, is properly
                                     defined as ‘‘associated with’’ or ‘‘connected to by attribution’’;
                                     accordingly, the dissent effectively submits that all relevant
                                     documents are ‘‘attached’’ to a taxpayer’s return, irrespective
                                     of any temporal considerations relating to the point at which
                                     those documents were tendered to the Commissioner. Any
                                     such interpretation is contrived and devoid of context.
                                       The dissent’s proffered secondary definitions of ‘‘attach’’ are
                                     not, as suggested, all ‘‘plain meanings [that] vary so widely’’,
                                     see dissenting op. p. 498, but rather are figurative extensions
                                     of its plain, literal meaning, ‘‘to fasten’’, see id. pp. 497–498
                                     & note 11. The plain meaning of a statute is the literal
                                     meaning of its words; and unless it is unreasonable to do so,
                                     we should prefer the plain and literal meaning of a statutory
                                     term. See United States v. Ron Pair Enters., Inc., 489 U.S.
                                     235, 242 (1989) (‘‘The plain meaning of legislation should be
                                     conclusive, except in the ‘rare cases [in which] the literal




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                                     480                 139 UNITED STATES TAX COURT REPORTS                                    (468)


                                     application of a statute will produce a result demonstrably at
                                     odds with the intentions of its drafters.’ ’’ (alteration in
                                     original) (quoting Griffin v. Oceanic Contractors, Inc., 458
                                     U.S. 564, 571 (1982))). If secondary figurative definitions
                                     could claim ‘‘plain meaning’’ status, then Congress would
                                     have to frequently qualify its chosen language with the
                                     adverb ‘‘literally’’ to foreclose the dissent’s interpretive
                                     method. We should reject any such artificial complication of
                                     the Code and, instead, employ a traditional, consistent and
                                     pragmatic approach to statutory interpretation.
                                        Indeed, a cursory reading of the numerous section 152(e)(2)
                                     cases decided by this Court reveals that we have uniformly
                                     held that the Form 8332 or similar document should be
                                     affixed to the return at issue. See, e.g., Chamberlain v.
                                     Commissioner, T.C. Memo. 2007–178, 2007 Tax Ct. Memo
                                     LEXIS 181, at *8–*9; Brissett v. Commissioner, T.C. Memo.
                                     2003–310, 2003 Tax Ct. Memo LEXIS 311, at *8–*9. In the
                                     seminal dependency exemption case of this Court, Miller v.
                                     Commissioner, 114 T.C. 184, 191 (2000), aff ’d sub nom.
                                     Lovejoy v. Commissioner, 293 F.3d 1208 (10th Cir. 2002), we
                                     prefaced our discussion of whether a divorce document quali-
                                     fied as ‘‘a statement conforming to the substance of Form
                                     8332’’ by specifically finding that the taxpayer ‘‘attached’’ the
                                     document to his return. However, if we were to accept the
                                     position of the dissent in the present case, this prelude would
                                     be irrelevant, as apparently all documents which are sub-
                                     mitted to the Commissioner at some indeterminate point
                                     may be appropriately considered by the Court.
                                        Furthermore, while the dissent endeavors to manipulate
                                     the seemingly plain meaning of the term ‘‘attach’’ to
                                     accommodate the expanding electronic tax return filing
                                     regime, we are presented with no reason to do so in this case.
                                     Petitioner physically filed his individual tax return for tax-
                                     able year 2007, and our focus should appropriately narrow to
                                     those particular facts. Instead, by approaching this present
                                     matter in a side opinion, we risk complicating our tax laws
                                     by implication. Indeed, the dissent’s mere suggestion that the
                                     term ‘‘attach’’ is subject to different interpretations may have
                                     unintended and far-reaching consequence. See dissenting op.
                                     note 13 (finding 15 current Code references to ‘‘attach’’ or
                                     ‘‘attachment’’). The onus of harmonizing the statutory scheme




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                                     (468)                         ARMSTRONG v. COMMISSIONER                                     481


                                     with nonstatutory changes in effective administrative proce-
                                     dure falls upon Congress and not this Court.
                                       We must be both circumspect and judicious in avoiding a
                                     manufactured ambiguity in our tax laws. The deliberate use
                                     of the word ‘‘attached’’, in the context of section 152(e)(2)(A),
                                     was intended to prescribe a contemporaneous affixation
                                     requirement; we have so held before.
                                       THORNTON, GALE, MARVEL, WHERRY, KROUPA, GUSTAFSON,
                                     and MORRISON, JJ., agree with this concurring opinion.



                                        HOLMES, J., dissenting: Mr. Armstrong promised to pay
                                     child support to his ex-wife, Ms. Delaney. Ms. Delaney
                                     agreed to let him claim the dependency exemption for one of
                                     their two children if he did. Mr. Armstrong paid the child
                                     support on time and in full throughout 2007. Ms. Delaney
                                     refused to sign the required IRS form that would have proved
                                     his claim. The Commissioner then rejected his claim, even
                                     though Mr. Armstrong had attached a copy of the arbitration
                                     award spelling out the deal to his 2007 return. Mr. Arm-
                                     strong later produced undisputed evidence—a state-court
                                     order—that Ms. Delaney had signed off on the agreement to
                                     give him the right to claim the exemption, and that he had
                                     kept his promise to pay support.
                                        That state-court order specified that as long as Mr. Arm-
                                     strong kept current with child support, he ‘‘shall have’’ the
                                     tax exemption for his minor child, C.E. It also mandated that
                                     Ms. Delaney ‘‘shall provide’’ Mr. Armstrong ‘‘an executed IRS
                                     Form 8332’’ for every year he was entitled to the exemption.
                                     Even though Mr. Armstrong kept his promise and paid his
                                     child support, Ms. Delaney did not keep her part of the deal
                                     and never gave him an executed Form 8332. The first ques-
                                     tion here is whether that state-court order that Ms. Delaney
                                     did sign ‘‘conform[s] to the substance’’ of Form 8332. See sec.
                                     1.152–4T(a), Q&A–3, Temporary Income Tax Regs., 49 Fed.
                                     Reg. 34459 (Aug. 31, 1984). The opinion of the Court agrees
                                     with the Commissioner that it doesn’t. I don’t take the same
                                     view.




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                                     482                 139 UNITED STATES TAX COURT REPORTS                                    (468)


                                     I. Conditionality
                                        Divorce decrees and separation agreements often transfer
                                     the right to a dependency exemption from one parent to
                                     another. They also very often make that transfer condi-
                                     tional—usually, as in this case, on the timely payment of
                                     child support. Yet the question of whether such conditional
                                     language makes it impossible to use that decree or agree-
                                     ment as a custodial parent’s ‘‘written declaration * * * that
                                     such custodial parent will not claim such child as a
                                     dependent,’’ sec. 152(e)(2)(A), is not one that has been ana-
                                     lyzed by any circuit court or even, before today, answered by
                                     our Court in a precedential Opinion. (It is one that a number
                                     of our memorandum opinions have touched on.)
                                        The majority says it is ‘‘obligated * * * to follow the
                                     statute as written,’’ see op. Ct. p. 476, and concludes that
                                     allowing Mr. Armstrong to take the dependency exemption
                                     based on a state-court order containing even an unambiguous
                                     condition is ‘‘at odds with the statute,’’ id. p. 474.
                                        I agree that we must follow the statute as written, but
                                     what does the statute mean?
                                        The question presented is: Does language in a state-court
                                     decree that ‘‘noncustodial X shall have the exemption for
                                     C.E. as long as he is current with his child support obligation
                                     for the tax year involved’’ ‘‘conform to the substance’’ of Form
                                     8332’s and section 152(e)’s requirement for a written declara-
                                     tion from custodial Y that she ‘‘will not claim such child as
                                     a dependent for any taxable year beginning in such calendar
                                     year?’’ Translated into English, the question is whether Ms.
                                     Delaney’s signed promise that Mr. Armstrong shall have the
                                     exemption for C.E. if he’s current with his child support is
                                     a promise not to claim the exemption herself.
                                        Now, obviously it is—but it’s a conditional promise. The
                                     rest of the Court reasons thusly:
                                        • section 152(e)(2)(A) requires ‘‘a custodial parent’s dec-
                                     laration that she ‘will not claim’ the child as a dependent.’’
                                     See op. Ct. p. 472 (citing sec. 152(e)(2)(A));
                                        • ‘‘This statement is unconditional.’’ See id.;
                                        • ‘‘[I]n order for a document to comply with the substance
                                     of Form 8332 and ultimately section 152(e)(2)(A), the declara-
                                     tion on the document must also be unconditional.’’ See id.;




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                                     (468)                         ARMSTRONG v. COMMISSIONER                                      483


                                        • the language in Mr. Armstrong’s form is conditional, see
                                     id. p. 473, and therefore,
                                        • Mr. Armstrong’s form does not conform to the substance
                                     of Form 8332 and section 152(e). See id. p. 474.
                                        What has just happened is an assumption of the conclu-
                                     sion—the conclusion to be proved is assumed to be the case
                                     in the third bullet point (and on page 472 of the Court’s
                                     opinion).
                                        This is not a promising way to construe the language of
                                     the Code and regulations. I would look at the problem
                                     altogether differently—this question being one where ‘‘a page
                                     of history is worth a volume of logic.’’ See New York Trust Co.
                                     v. Eisner, 256 U.S. 345, 349 (1921). But to gain a better
                                     understanding of the law in effect for the year at issue, I
                                     would begin in the present. As the majority notes, the
                                     Commissioner would almost certainly win on the condition-
                                     ality question here if current section 1.152–4(e)(1), Income
                                     Tax Regs., as amended by T.D. 9408, 2008–2 C.B. 323, 327,
                                     applied. That regulation states:
                                       (i) In general.—The written declaration * * * must be an unconditional
                                     release of the custodial parent’s claim to the child as a dependent for the
                                     year or years for which the declaration is effective. A declaration is not
                                     unconditional if the custodial parent’s release of the right to claim the
                                     child as a dependent requires the satisfaction of any condition, including
                                     the noncustodial parent’s meeting of an obligation such as the payment of
                                     support. * * *
                                       (ii) Form designated by IRS.—A written declaration may be made on
                                     Form 8332 * * * A written declaration not on the form designated by the
                                     IRS must conform to the substance of that form and must be a document
                                     executed for the sole purpose of serving as a written declaration under this
                                     section. A court order or decree or a separation agreement may not serve
                                     as a written declaration.
                                       [Id.]

                                     See also sec. 1.152–4(g), Examples (16), (18), Income Tax
                                     Regs. (as amended by T.D. 9408, 2008–2 C.B. at 329). 1
                                       1 Whether this regulation would survive review is a question for a later day. Although the Sec-

                                     retary may well have legitimate reasons for limiting the scope of what can serve as a written
                                     declaration, he must do so in a rational way. See Judulang v. Holder, 565 U.S. ll, ll, 132
                                     S. Ct. 476, 485 (2011). Allowing a custodial spouse to unilaterally revoke a noncustodial spouse’s
                                     legal right to claim a dependency exemption—by refusing to sign a Form 8332—raises a serious
                                     question about the regulation’s validity under an arbitrary-and-capricious standard. That the
                                     regulation saves time and money won’t necessarily salvage an arbitrary agency policy. See id.
                                     at ll, 132 S. Ct. at 489–90.




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                                     484                 139 UNITED STATES TAX COURT REPORTS                                    (468)


                                        As the majority acknowledges, however, see op. Ct. note 6
                                     and note 7, this regulation does not apply for the 2007 tax
                                     year. See sec. 1.152–4(h), Income Tax Regs. (as amended by
                                     T.D. 9408, 2008–2 C.B. at 329). That means that we have to
                                     figure out what the law was before the regulation.
                                        Apart from our caselaw, the first hint that conditions
                                     would make a taxpayer’s right to claim a dependency exemp-
                                     tion ineffective came from a January 2006 revision to Form
                                     8332. In the ‘‘[g]eneral [i]nstructions’’ for a ‘‘[p]ost-1984
                                     decree or agreement’’ the Commissioner noted:
                                     If the divorce decree or separation agreement went into effect after 1984,
                                     the noncustodial parent can attach certain pages from the decree or agree-
                                     ment instead of Form 8332. To be able to do this, the decree or agreement
                                     must state * * * the following.
                                       1. The noncustodial parent can claim the child as a dependent without
                                     regard to any condition (such as payment of support).
                                       [Form 8332 (as revised January 2006).]

                                     But neither IRS forms nor their instructions are binding
                                     authority. See, e.g., Weiss v. Commissioner, 129 T.C. 175, 177
                                     (2007). The use of such a form to create substantive tax law
                                     also creates serious administrative-law problems. See
                                     Administrative Procedure Act, 5 U.S.C. sec. 553 (2006).
                                        In any event, not long after this revision, the Secretary
                                     issued a notice of proposed rulemaking to change section
                                     1.152–4, Income Tax Regs., and incorporate provisions of sec-
                                     tion 1.152–4T, Temporary Income Tax Regs., supra. See
                                     Notice of Proposed Rulemaking, 72 Fed. Reg. 24192 (May 2,
                                     2007). The notice stated that changes to the regulation would
                                     in part be made to ‘‘provide guidance on issues that have
                                     arisen in the administration of section 152(e).’’ Id., 72 Fed.
                                     Reg. at 24193. One of these proposed changes
                                     further provide[d] that a written declaration must include an uncondi-
                                     tional statement that the custodial parent will not claim the child as a
                                     dependent for the specified year or years. A statement is unconditional if
                                     it does not expressly condition the custodial parent’s waiver of the right
                                     to claim the child as a dependent on the noncustodial parent’s meeting of
                                     an obligation such as the payment of support. * * * [Id.]

                                       The Secretary received a comment arguing that a divorce
                                     settlement agreed to by both parents should still be able to
                                     serve as a standalone declaration. See T.D. 9408, 2008–33
                                     I.R.B. 323. He responded that requiring a Form 8332 or a




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                                     (468)                         ARMSTRONG v. COMMISSIONER                                     485


                                     document specifically executed for that purpose improves tax
                                     administration and reduces controversy. See id. at 325. To be
                                     sure, these are laudable goals. But this sort of rule-crafting
                                     is his domain, not ours. Cf. Judulang v. Holder, 565 U.S.
                                     ll, ll, 132 S. Ct. 476, 489–90 (2011) (rejecting govern-
                                     ment assertion that regulation ‘‘saves time and money’’ in
                                     invalidating an ‘‘arbitrary agency policy’’). What’s telling
                                     about his actions, and relevant to the analysis of the state
                                     of the law before section 1.152–4, Income Tax Regs., as
                                     amended by T.D. 9408, 2008–33 I.R.B. 323, is that the Sec-
                                     retary believed he needed to redraft his regulation to ban
                                     conditionality.
                                       But was he correct?
                                           A. Congress’s and the Commissioner’s Views of Conditions
                                        I would begin by noting that all noncustodial parents’
                                     claims to exemptions for their children used to be condi-
                                     tional—conditional on the parent’s providing more than half
                                     the support for the child during the tax year. See sec. 152 (as
                                     in effect before the Act of Aug. 31, 1967, Pub. L. No. 90–78,
                                     sec. 2, 81 Stat. at 192). This set up enormously involved bat-
                                     tles between former spouses about who spent how much and
                                     for what and on whom, and Congress finally came to our
                                     Court’s relief after noticing that nearly five percent of all
                                     income-tax cases were of this type. See H.R. Rept. No. 90–
                                     102 (1967), 1967–2 C.B. 590, 592.
                                        Congress’s first attempt at a solution was to add section
                                     152(e) to allow parents to allocate exemptions in a divorce
                                     decree or separation agreement. See Act of Aug. 31, 1967,
                                     sec. 1, 81 Stat. at 191–92. It gave a noncustodial parent the
                                     dependency exemption if the divorce decree or separation
                                     agreement awarded him the exemption and he provided the
                                     child at least $600 of support in any given tax year. The
                                     ‘‘overriding purpose’’ of the change was ‘‘to provide certainty
                                     to the parties.’’ McClendon v. Commissioner, 74 T.C. 1, 3
                                     (1980) (citing S. Rept. No. 90–488 (1967), 1967 U.S.C.C.A.N.
                                     1527, and H.R. Rept. No. 90–102, supra); see also S. Rept.
                                     No. 90–488, supra, 1967 U.S.C.C.A.N. at 1529 (‘‘[T]he bill
                                     * * * amend[s] present law to provide a set of rules under
                                     which [the dependency exemption] issue may be resolved on
                                     a basis that is more satisfactory to the parents and which




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                                     486                 139 UNITED STATES TAX COURT REPORTS                                    (468)


                                     will alleviate the current administrative burden’’). Yet Con-
                                     gress still made the IRS’s respect for that allocation condi-
                                     tional on the noncustodial parent’s providing at least $600 in
                                     child support—a condition that would allow the kind of
                                     agreement Mr. Armstrong had with Ms. Delaney. See Act of
                                     Aug. 31, 1967, sec. 1, 81 Stat. at 191–92. The legislative his-
                                     tory of section 152(e) says that this would allow state courts
                                     ‘‘hearing divorce and separation suits to resolve [the depend-
                                     ency exemption] issue in many cases at the time they are
                                     considering the financial arrangements which are to apply
                                     between the parents and to take the income tax deduction
                                     directly into account in this connection.’’ S. Rept. No. 90–488,
                                     supra at 1529. Congress also provided a second method for
                                     a noncustodial parent to get the exemption: He could show
                                     that he spent at least $1,200 on the child, but only if the
                                     custodial parent could not ‘‘clearly establish’’ that she spent
                                     more on that child. See id. at 1528.
                                        Our caselaw interpreting that version of section 152(e) con-
                                     firmed that conditionality in a separation agreement or a
                                     divorce decree did not prevent a noncustodial parent from
                                     claiming the dependency exemption. See Flatt v. Commis-
                                     sioner, T.C. Memo. 1986–495, 1986 WL 21704 (‘‘[W]here a
                                     divorce agreement conditions the claim for dependency
                                     exemptions upon the performance of specific obligations, it is
                                     appropriate for this Court to determine if, in fact, the party
                                     obligated to meet such conditions has fully complied’’); Flautt
                                     v. Commissioner, T.C. Memo. 1983–172, 1983 WL 14153
                                     (analyzing whether noncustodial parent had fulfilled the
                                     conditions of a separation agreement in deciding whether he
                                     qualified for dependency exemption under section 152(e)(2)).
                                        The second method by which the noncustodial parent could
                                     claim the exemption, however, proved exceptionally conten-
                                     tious. See, e.g., Justin S. Holden, ‘‘The Domestic Relations
                                     Tax Act of 1984’’, 34 R.I. B.J. 11, 11 (1986) (‘‘Under prior law
                                     the Tax Court was the scene of literally thousands of trials
                                     to determine whether Mom or Pop was entitled to the $1,000
                                     exemption for little Johnny’’). This spurred Congress to
                                     substantially revise section 152(e) in the Deficit Reduction
                                     Act of 1984 (DEFRA), Pub. L. No. 98–369, sec. 423(a), 98 Stat.
                                     at 799. During that overhaul, Congress collapsed the two
                                     exceptions into one:




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                                     (468)                          ARMSTRONG v. COMMISSIONER                                                 487


                                     SEC. 152. DEPENDENT DEFINED.

                                           (e) SUPPORT TEST         IN   CASE    OF   CHILD        OF   DIVORCED PARENTS, ETC.—

                                                                         *      *      *       *        *      *      *
                                             (2) EXCEPTION          WHERE CUSTODIAL PARENT RELEASES CLAIM TO EXEMP-
                                           TION FOR THE YEAR.—A     child of parents described in paragraph (1) shall
                                           be treated as having received over half of his support during a calendar
                                           year from the noncustodial parent if—
                                               (A) the custodial parent signs a written declaration (in such manner
                                             and form as the Secretary may by regulations prescribe) that such
                                             custodial parent will not claim such child as a dependent for any tax-
                                             able year beginning in such calendar year, and
                                               (B) the noncustodial parent attaches such written declaration to the
                                             noncustodial parent’s return for the taxable year beginning during
                                             such calendar year.
                                           [Sec. 152(e)(2) (as amended by DEFRA sec. 423(a)).]

                                     Congress eliminated the troublesome $1,200-but-more-than-
                                     your-ex spending test, but grandfathered for divorce decrees
                                     already in effect the old allocation-in-the-decree-plus-prove-
                                     more-than-$600-in-child-support test. See sec. 152(e) (as
                                     amended by DEFRA sec. 423(a)).
                                       As the majority notes, see op. Ct. note 9, Congress’s pur-
                                     pose in making these changes was ‘‘to provide more certainty
                                     by allowing the custodial spouse the exemption unless that
                                     spouse waives his or her right to claim the exemption.’’ H.R.
                                     Rept. No. 98–432 (Part 2), at 1499 (1984), 1984 U.S.C.C.A.N.
                                     697, 1140. Congress wanted more certainty because aspects
                                     of the law then in place were ‘‘often subjective and
                                     present[ed] difficult problems of proof and substantiation.’’
                                     Id. at 1498, 1984 U.S.C.C.A.N. at 1140. The majority takes
                                     this language and says it was aimed at banking the fires
                                     from parents fighting over the first method (the allocation-in-
                                     the-decree-plus-prove-more-than-$600 test) that we were
                                     having to extinguish. See op. Ct. p. 475 & note 9. But look
                                     at the very next sentence from the House report: Congress
                                     emphasized instead that ‘‘[t]he Internal Revenue Service
                                     becomes involved in many disputes between parents who
                                     both claim the dependency exemption based on providing
                                     support over the applicable thresholds.’’ H.R. Rept. No. 98–
                                     432 (Part 2), supra at 1498, 1984 U.S.C.C.A.N. at 1140
                                     (emphasis added). This language means Congress was
                                     pointing its fire extinguisher at disputes under the second
                                     method, not the first. In other words, Congress’s concern




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                                     leading up to the 1984 section 152(e) amendments was with
                                     the yearly contests between parents on how much they spent
                                     on their kids, not on conditional transfers of exemptions.
                                     Indeed, our caselaw has said as much. See Caputi v.
                                     Commissioner, T.C. Memo. 2004–283, 2004 WL 2955865, at
                                     *1 (noting—without mentioning the first test—that the
                                     $1,200-plus-who-spent-more-on-the-child      test     ‘‘put  the
                                     Internal Revenue Service (IRS) in the middle of conflicts
                                     between parents that were ‘often subjective and [presented]
                                     difficult problems of proof and substantiation’ ’’ (quoting H.R.
                                     Rept. No. 98–432 (Part 2), supra at 1498, 1984 U.S.C.C.A.N.
                                     at 1140)).
                                        Congress expected that the requirement of getting a dec-
                                     laration would increase the probability that noncustodial par-
                                     ents would keep current in their payment of child support:
                                     ‘‘the declaration may be made by the custodial spouse
                                     annually in order to better insure the receipt of child support
                                     payments.’’ See H.R. Rept. No. 98–432 (Part 2), supra at
                                     1499, 1984 U.S.C.C.A.N. at 1141; see also Rodney V. Nutt,
                                     Note, ‘‘Tax Law—The 1984 Amendment to I.R.C. § 152(e):
                                     Did Congress Intend to Preempt a State Court’s Authority to
                                     Allocate the Dependent Child Exemption?’’, 14 W. New Eng.
                                     L. Rev. 59, 68–69 (1992) (noting state supreme court’s anal-
                                     ysis that section 152(e)’s legislative history seemed to show
                                     congressional desire ‘‘to enable a custodial parent to use the
                                     dependent child exemption as an inducement’’ for paying
                                     child support); Roland L. Hjorth, ‘‘Divorce, Taxes, and the
                                     1984 Tax Reform Act: An Inadequate Response to an Old
                                     Problem’’, 61 Wash. L. Rev. 151, 186 (1986) (suggesting the
                                     yearly approach as an enforcement mechanism for the custo-
                                     dial parent); James A. Rodenberg, ‘‘Allocating Federal
                                     Income Tax Dependency Exemptions in Divorce Decrees’’, 55
                                     Mo. L. Rev. 1075, 1098 (1990) (suggesting same). Conditional
                                     language in a divorce decree—an agreement that the non-
                                     custodial parent can claim dependency exemptions if he pays
                                     the required child support—accomplishes the same end. The
                                     annual declaration would seem to be little more than a
                                     receipt for the fulfillment of that legally binding original
                                     promise. 2
                                       2 Congress had, a few years before, enacted section 6402(c), see Omnibus Budget Reconciliation

                                     Act of 1981, Pub. L. No. 97–35, sec. 2331(c)(2), 95 Stat. at 860–61, which requires the Secretary
                                     to reduce the amount of a taxpayer’s refund by the amount of his delinquent support obligations




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                                     (468)                         ARMSTRONG v. COMMISSIONER                                     489


                                        There is nothing in this history that suggests Congress
                                     thought it needed to end conditional transfers of exemptions,
                                     or render them unenforceable at the whim of the custodial
                                     parent. It just wanted to end the yearly contests between
                                     parents on how much they spent on their kids—contests that
                                     had become the festivals of litigation.
                                        A look at the Internal Revenue Manual (IRM) from around
                                     that time also shows the Commissioner to be unconcerned
                                     with the conditionality of transferring exemptions. 3 Shortly
                                     after Congress enacted section 6402(c), the IRS developed a
                                     ‘‘Child Support Refund Offset Program.’’ IRM pt. 4(13)(25)0
                                     (Dec. 23, 1986). As part of its procedures for administering
                                     section 6402(c), the IRS notified a taxpayer who was delin-
                                     quent on his child-support obligations, but had nevertheless
                                     claimed the dependency exemption, that he ‘‘may not have
                                     furnished the necessary 50% support that would enable [him]
                                     to claim the dependent(s) shown on [his] return.’’ Id. pt.
                                     4(13)(25)4(1) (Nov. 16, 1992). With its notice, the IRS enclosed
                                     a questionnaire that solicited information which might
                                     substantiate the taxpayer’s case. See id. If he provided this
                                     ‘‘substantiation’’, the IRS had to allow the exemption. Id. pt.
                                     4(13)(25)4(2) (Nov. 16, 1992). 4
                                           B. State Courts’ Use of Conditions
                                        Congress’s and the Commissioner’s lack of concern over
                                     conditions (such as payment of support) isn’t surprising.
                                     Then, as now, several states allowed—or even required—
                                     courts to condition the allocation of dependency exemptions
                                     on the noncustodial parent’s payment of child support. Since
                                     at least 1999, for example. Florida has required a divorce
                                     court’s allocation of the dependency exemption to be condi-
                                     tional upon the noncustodial parent’s payment of child sup-
                                     and send the difference to the state seeking to collect such obligations. This provision—also
                                     aimed at getting child support paid—has remained substantively unchanged to this day. See sec.
                                     6402(c).
                                        3 The IRM doesn’t carry the force of law, Rhone-Poulenc Surfactants & Specialties, L.P. v.

                                     Commissioner, 114 T.C. 533, 543 n.16 (2000), but we can use the IRM as persuasive authority
                                     of the Commissioner’s interpretation of the Code to guide our own evaluation, see id.
                                        4 Foreshadowing the discussion in the next section, this part of the IRM also speaks to the

                                     definition of attachment. One section mentions a taxpayer ‘‘submit[ting] [a] Form 8332’’ pursu-
                                     ant to the IRS’s request for documentation; the taxpayer would need to submit a Form 8332
                                     only if he hadn’t already provided a declaration or a Form 8332 with his filed return. See IRM
                                     pt. 4(13)(25)4(3) (Nov. 16, 1992). The IRM required the taxpayer to substantiate his payment
                                     of child support even if he submitted a Form 8332. See id. Nothing in this IRM part indicates
                                     that the IRS would ignore a taxpayer’s late submission of a Form 8332.




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                                     490                 139 UNITED STATES TAX COURT REPORTS                                      (468)


                                     port. See 1999 Fla. Sess. Law Serv. ch. 99–359 (H.B. 145),
                                     sec. 1 (West) (currently codified at Fla. Stat. Ann. sec.
                                     61.30(11)(a)(8) (West 2012)). Alaska has had a similar law in
                                     place since 1998. See 1998 Alaska Sess. Laws ch. 132 (H.B.
                                     344), sec. 13 (currently codified at Alaska Stat. Ann. sec.
                                     25.24.152(a) (West 2010)). And Colorado as well, since at
                                     least 1992. See 1992 Colo. Legis. Serv. H.B. 92–130, sec. 1
                                     (West) (currently codified at Colo. Rev. Stat. Ann. sec. 14–
                                     10–115(12) (LexisNexis 2012)). These states are by no means
                                     outliers. 5 In states that have such a requirement, the major-
                                     ity’s holding will allow a custodial spouse who refuses to sign
                                     a Form 8332 in violation of a divorce decree or separation
                                     agreement to unilaterally prevent a noncustodial spouse from
                                     otherwise lawfully claiming a dependency exemption. 6 I
                                     think it reasonable to conclude that our holding today will
                                     upset expectations settled under state law. It is as if a res-
                                     taurant could defeat a taxpayer’s deduction for a business
                                     dinner by not giving him a receipt, even if he showed us the
                                     bill and a credit-card statement that showed he paid it.
                                        The rest of the Court reasons that the purpose of section
                                     152’s declaration requirement was to ease the IRS’s burden of
                                     enforcement. But I would conclude that there is nothing in
                                     the history of DEFRA’s language or apparent purpose to sug-
                                     gest Congress had concluded that conditioning an exemption
                                     transfer on payment of child support was too difficult to
                                     enforce. What we have—a widely followed approach in terms
                                     of state statutory law on the subject—suggests that the
                                     custodial-parent-declaration system was a low-cost and more
                                     certain way of enforcing a noncustodial parent’s support
                                     obligations, not a trap for the unwary noncustodial parent
                                       5 Both Indiana and Minnesota also require the allocation of the dependency exemption to a

                                     noncustodial parent to be conditioned on the payment of child support. Ind. Code Ann. sec. 31–
                                     16–6–1.5(d) (LexisNexis Supp. 2012); Biscoe v. Biscoe, 443 N.W.2d 221, 224–25 (Minn. Ct. App.
                                     1989). Similarly, in Louisiana, the courts cannot allocate the dependency exemption to a non-
                                     custodial parent if there are any outstanding child support payments owed to the custodial par-
                                     ent. La. Rev. Stat. Ann. sec. 9:315.18(B)(1)(a) (2008). Though to my knowledge no court has yet
                                     ruled on the issue, Louisiana’s statute could be broadly read to require the noncustodial parent
                                     to stay current on his support obligation in order to keep the exemption. See id. Notably, I have
                                     found no state that disallows conditioning the allocation of the dependency exemption on the
                                     noncustodial parent staying current on his support obligations.
                                       6 Commentators have noted that just telling noncustodial parents in this situation that their

                                     remedy lies in asking a state court to order an offsetting reduction in future support if the custo-
                                     dial parent refuses to fill out a Form 8332 would cause collateral damage to the minor children
                                     who are supposed to benefit from that support. See James A. Rodenberg, ‘‘Allocating Federal
                                     Income Tax Dependency Exemptions in Divorce Decrees’’, 55 Mo. L. Rev. 1075, 1096–97 (1990).




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                                     (468)                         ARMSTRONG v. COMMISSIONER                                     491


                                     like Mr. Armstrong who dutifully fulfills them. See Nutt,
                                     supra, at 68–69. But see Hjorth, supra, at 186 (acknowl-
                                     edging the potential for Mr. Armstrong’s problem).
                                           C. Post-DEFRA Caselaw Regarding Conditions
                                        So what happened with our caselaw after the 1984 amend-
                                     ments, and after Flatt and Flautt (which both signaled
                                     approval of looking at whether a noncustodial parent fulfilled
                                     the conditions in a separation agreement to decide whether
                                     he qualified for a dependency exemption)? Here, again,
                                     there’s another page of history to read. It starts with the
                                     memorandum opinion, White v. Commissioner, T.C. Memo.
                                     1996–438, 1996 WL 540111. In White, a divorce decree enti-
                                     tled the noncustodial parent to ‘‘claim the two * * * children
                                     of the marriage as his beneficiaries for income tax purposes,’’
                                     and required the custodial parent to execute whatever docu-
                                     ments were necessary to enable the noncustodial parent to
                                     claim dependency exemptions for the children. Id., 1996 WL
                                     540111, at *1. The custodial parent then signed a letter
                                     saying that the noncustodial parent was indeed ‘‘entitled to
                                     claim the two * * * children of the marriage as his bene-
                                     ficiaries for income tax purposes.’’ Id. We held, however, that
                                     the noncustodial parent couldn’t take the dependency exemp-
                                     tion because the letter didn’t ‘‘conform to the substance’’ of
                                     Form 8332. Id. at *3. But why? We first noted that the letter
                                     failed to state the years for which the custodial parent was
                                     releasing the claims for exemption, and also failed to state
                                     the Social Security numbers for both parents—both require-
                                     ments under the applicable regulation. Id. We then stated—
                                     ‘‘most importantly’’—that the letter failed to explicitly state
                                     that the custodial parent would not claim either of the two
                                     children as her dependent. Id. We went on to note that—
                                     although the divorce decree said that the noncustodial parent
                                     was entitled to the dependency exemptions—‘‘[s]tate courts,
                                     by their decisions, cannot determine issues of Federal tax
                                     law.’’ Id.
                                        It’s often hard to glean exactly what elements are essential
                                     to a taxpayer’s case when he loses for several different rea-
                                     sons. This is a part of tax law where a great many working-
                                     and middle-class parents try to represent themselves and are
                                     usually not very good at researching the development of




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                                     492                 139 UNITED STATES TAX COURT REPORTS                                    (468)


                                     caselaw and distinguishing one precedent from another. This
                                     almost guarantees some problems in reaching consistent
                                     results. We have held, somewhat contrary to White, that the
                                     Social Security numbers of the parents—one of the blanks to
                                     fill in on a Form 8332—are not essential to its substance.
                                     Bramante v. Commissioner, T.C. Memo. 2002–228, 2002 WL
                                     31039137, at *2–*3. (We have also held, somewhat consist-
                                     ently with White, that not listing which tax years the custo-
                                     dial parent is surrendering—another blank on that form—is
                                     fatal. See Santana v. Commissioner, T.C. Memo. 2012–49,
                                     2012 WL 571284, at *2; Briscoe v. Commissioner, T.C. Memo.
                                     2011–165, 2011 WL 2709582, at *3.) But the really striking
                                     aspect of White is its statement—‘‘[s]tate courts, by their
                                     decisions, cannot determine issues of Federal tax law’’—that
                                     implies that even a divorce decree that unconditionally
                                     transfers exemptions to the noncustodial parent isn’t good
                                     enough. 7 White, 1996 WL 540111, at *3.
                                        Although the majority repeats this sweeping generaliza-
                                     tion, see op. Ct. pp. 474–475, 8 even this part of White’s
                                     holding seems not to have survived fully intact. In another
                                     memorandum opinion, Boltinghouse v. Commissioner, T.C.
                                     Memo. 2003–134, 2003 WL 21078104 at *3–*4, we held
                                     (without acknowledging White) that a state-court separation
                                     agreement did conform to the substance of Form 8332. Like
                                     the agreement in White, the agreement in Boltinghouse was
                                     an unconditional transfer. Id. at *3. The important factor,
                                         7 This is a very broad generalization—state-court divorce decrees allocate rights between par-

                                     ents. The characterization of those rights for federal tax-law purposes remains a federal ques-
                                     tion, see, e.g., United States v. Nat’l Bank of Commerce, 472 U.S. 713, 722 (1985), but many
                                     states and commentators view the allocation of tax exemptions as very much one of the items
                                     that state courts can and do regulate, see Robert G. Nassau, ‘‘How to Split the Tax Baby: What
                                     Would Solomon Do?’’, 61 Syracuse L. Rev. 83, 107–109 (2010); see also Rodenberg, supra, at
                                     1084 (‘‘[C]ourts routinely used their powers to allocate the exemption in divorce decrees’’). And
                                     for many decades the Code expressly allowed state courts to allocate exemptions, as it still does
                                     for pre-1985 arrangements. See sec. 152(e)(3). A more precise formulation, therefore, is that a
                                     state-court allocation of federal-tax exemptions between divorced parents can’t bind the Commis-
                                     sioner.
                                         8 The majority quotes a T.C. opinion. See Miller v. Commissioner, 114 T.C. 184, 196 (2000)

                                     (‘‘[A] state court cannot determine issues of Federal tax law’’), aff ’d on other grounds sub nom.
                                     Lovejoy v. Commissioner, 293 F.3d 1208 (10th Cir. 2002). Miller itself relied on White when it
                                     made that statement, and it was not at all essential to our holding. In Miller, the noncustodial
                                     parent attached to his return a state-court order that unconditionally allocated to him the de-
                                     pendency exemptions for both of his children. That order, however, wasn’t signed by the custo-
                                     dial parent. We held that the lack of a signature was the fatal flaw, determining that ‘‘[s]imply
                                     attaching a State court order that is not signed by the custodial parent to the return of the
                                     noncustodial parent does not satisfy the express statutory requirements of section 152(e)(2)(A).’’
                                     Id. Miller’s statement regarding state-court determinations—besides being a broad generaliza-
                                     tion—would seem to be dictum.




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                                     (468)                         ARMSTRONG v. COMMISSIONER                                     493


                                     Boltinghouse said, was that there was no ambiguity about
                                     what years were covered. See id. at *3–*4; see also, e.g.,
                                     Loffer v. Commissioner, T.C. Memo. 2002–298, 2002 WL
                                     31719896, at *2 (signed divorce decree might suffice, but not
                                     one that doesn’t specify which children or tax years are cov-
                                     ered). Ambiguity alone—not the use of a state-court agree-
                                     ment, and not the presence or absence of Social Security
                                     numbers—is enough to distinguish Boltinghouse from White.
                                        The majority, however, uses Boltinghouse for an entirely
                                     different reason—citing it as support for its holding requiring
                                     a declaration to be unconditional for a noncustodial parent to
                                     claim the dependency exemption. See op. Ct. p. 472. I’m hesi-
                                     tant, however, to glean that principle from Boltinghouse
                                     because conditionality was not at issue there. We focused
                                     instead on whether the agreement conformed to the sub-
                                     stance of Form 8332 even though it didn’t explicitly state the
                                     years for which the dependency exemptions were to be
                                     released. 9 Boltinghouse’s holding didn’t rely upon the
                                     unconditional nature of the transfer, and never appeared to
                                     hint that the absence of conditionality was a prerequisite for
                                     a declaration to conform to the substance of Form 8332.
                                        Despite that context, our caselaw began to frequently cite
                                     Boltinghouse as a prohibition of using divorce decrees with
                                     conditional clauses as substitutes substantially in the same
                                     form as Forms 8332. In Thomas v. Commissioner, T.C.
                                     Memo. 2010–11, 2010 WL 174107, we said the dictum from
                                     Boltinghouse stood for the rule that ‘‘only a release that is
                                     unconditional conforms to the substance of Form 8332 and
                                     meets the requirements of section 152(e)(2).’’ Thomas, 2010
                                     WL 174107, at *3.
                                        The next case to take its inspiration from the ‘‘uncondi-
                                     tional’’ language in Boltinghouse was Gessic v. Commissioner,
                                     T.C. Memo. 2010–88, 2010 WL 1644694. Indeed, the majority
                                     cites Gessic to support its position that ‘‘ ‘the Internal Rev-
                                     enue Service cannot be expected to police divorce decrees and
                                       9 The Commissioner had also claimed in Boltinghouse that the agreement didn’t conform to

                                     the substance of Form 8332 because it didn’t include the Social Security numbers of the parents.
                                     2003 WL 21078104, at *4. We flatly rejected that assertion as ‘‘without merit.’’ Id. (citing
                                     Bramante v. Commissioner, T.C. Memo. 2002–228, 2002 WL 31039137, which held that the
                                     omission of a custodial parent’s Social Security number on a declaration didn’t invalidate the
                                     release). But see Thomas v. Commissioner, T.C. Memo. 2010–11, 2010 WL 174107, at *3 (holding
                                     decree didn’t conform to the substance of Form 8332 because—among other reasons—it didn’t
                                     contain parents’ Social Security numbers).




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                                     494                 139 UNITED STATES TAX COURT REPORTS                                    (468)


                                     separation agreements or determine taxpayer compliance
                                     therewith.’ ’’ See op. Ct. p. 475 (quoting Gessic, 2010 WL
                                     1644694, at *3). I’d like to put some context around that
                                     statement.
                                        Gessic is another case where there were multiple problems
                                     with the noncustodial parent’s evidence, including a failure
                                     to name the children involved. Id. at *3. But in the course
                                     of denying the exemption to the noncustodial parent, we
                                     distinguished Boltinghouse as arising from an unconditional
                                     transfer. Id. (In Gessic, by contrast, the transfer of exemp-
                                     tions was until ‘‘such time as Ms. Gessic returned to work
                                     full time and earned over $20,000 per year.’’ Id.) This was
                                     true as a factual matter, and it was important because the
                                     conditional language in the Gessics’ agreement created an
                                     ambiguity as to what tax years were applicable. We could
                                     have added that ‘‘full time’’ and ‘‘earned over $20,000 per
                                     year’’ are not at all clear in their meanings, but to be sure
                                     we reasoned instead these terms might ‘‘change from year to
                                     year, such that petitioner’s entitlement to the dependency
                                     exemptions for his children is potentially subject to change
                                     each year.’’ Id.; see also, e.g., Horn v. Commissioner, T.C.
                                     Memo. 2002–290, 2002 WL 31662270, at *2 (rejecting
                                     transfer of exemptions conditioned on the transfer ‘‘not
                                     interfer[ing] with [the custodial parent’s] ability to receive
                                     Federal Student Aid,’’ but also for failing to identify years
                                     involved).
                                        What I would take away from Gessic and Horn is that
                                     ambiguous terms in a divorce decree—terms with two or
                                     more possible meanings, such as ‘‘if it won’t interfere with
                                     the spouse’s ability to get federal student loans’’ or ‘‘until the
                                     spouse is working full time’’—are too indefinite a description
                                     of the years for which a custodial spouse is surrendering her
                                     children’s exemptions. But ambiguity is not the same as
                                     conditionality. And Congress has expressly contemplated
                                     annual declarations to be a useful enforcement mechanism
                                     for timely payment of child support, and the states them-
                                     selves have been making (and in some cases, are required to
                                     make) allocations of exemptions between divorcing spouses
                                     conditional on payment of child support.
                                        That leaves our nonprecedential caselaw from Thomas. I
                                     acknowledge it uses a parenthetical to describe Boltinghouse
                                     as saying ‘‘only a release that is unconditional conforms to




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                                     (468)                         ARMSTRONG v. COMMISSIONER                                      495


                                     the substance of Form 8332.’’ Thomas, 2010 WL 174107, at
                                     *3. As explained earlier, however, conditionality was not at
                                     issue in Boltinghouse, its holding didn’t rely on the uncondi-
                                     tional nature of the transfer, and it didn’t say that the pres-
                                     ence of conditionality in a declaration is a bar preventing it
                                     from conforming to the substance of Form 8332. As the only
                                     habiliment with which Thomas cloaked its reasoning was its
                                     citation of that dictum, the origins of Thomas’s reasoning
                                     had no firm foundation in the statute, its legislative history,
                                     or a regulation in effect at that time. I would not have given
                                     it any weight.
                                           D. Whether the State-Court Order Conforms to the Sub-
                                              stance of Form 8332
                                       It’s important to remember here that the Commissioner
                                     stipulated that Mr. Armstrong met his condition—he in fact
                                     paid his child support in full and on time. When Mr. Arm-
                                     strong satisfied that unambiguous condition precedent, Ms.
                                     Delaney—according to the terms of the state-court order—did
                                     not have a choice as to whether she could claim the depend-
                                     ency exemption. She categorically did not have a legal right
                                     to claim it.
                                       The majority acknowledges that in this case it is easy to
                                     determine whether the noncustodial parent satisfied the
                                     condition. See op. Ct. p. 475. But it says that it is concerned
                                     with other cases where determining the fulfillment of the
                                     condition ‘‘may be difficult and controversial.’’ See id. If a
                                     case in the future arises where an ambiguous condition again
                                     presents ‘‘difficult problems of proof and substantiation,’’ we
                                     should speak to that issue at that time. But that’s just not
                                     the case here. We shouldn’t group Mr. Armstrong in with
                                     those other ‘‘difficult and controversial’’ cases when his case
                                     has no such problems. And we should definitely not hold that
                                     our conclusion is a plain-meaning construction. 10
                                       By holding that Mr. Armstrong is not entitled to the
                                     dependency exemption, the majority dishonors a state-court
                                     judgment ordering Ms. Delaney not to claim the exemption
                                       10 Let’s assume for a moment that the Secretary promulgated a regulation that said—as an

                                     alternative to a Form 8332—a noncustodial parent can also satisfy section 152(e)(2) by attaching
                                     to his return (1) a divorce decree/separation agreement which allocates the exemption to him
                                     so long as he pays child support; and (2) substantiation that he did, in fact, meet his child sup-
                                     port obligations. Under the majority’s reasoning, that regulation would be invalid under step
                                     one of Chevron, which says the plain meaning of a statute overrides regulations to the contrary.




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                                     496                 139 UNITED STATES TAX COURT REPORTS                                    (468)


                                     and to provide Mr. Armstrong an executed IRS Form 8332 for
                                     1997. The legislative history of section 152(e) explicitly
                                     acknowledges the important role state courts play in allo-
                                     cating the dependency exemption via a court order, and
                                     nothing in the legislative history of the 1984 amendments
                                     suggests anything to the contrary. The Armstrongs are not
                                     deadbeats trying to game the system; they are honest tax-
                                     payers caught in the difficulties attendant to divorce—dif-
                                     ficulties exacerbated by the lack of clear guidelines from the
                                     IRS and this Court. Because Mr. Armstrong fulfilled the state
                                     court’s unambiguous condition to get the dependency exemp-
                                     tion for C.E. for 2007, I don’t think that condition should be
                                     used to block him from claiming it. I would instead honor
                                     that state-court order as conforming to the substance of Form
                                     8332.
                                     II. Attachment
                                        Just because the Armstrongs should win on conditionality
                                     doesn’t mean they necessarily can claim the dependency
                                     exemption for C.E. The Code also requires that the noncusto-
                                     dial parent ‘‘attach’’ the signed declaration to his tax return.
                                     See sec. 152(e)(2)(B); sec. 1.152–4T(a), Q&A–3, Temporary
                                     Income Tax Regs., supra. As the majority notes (although
                                     doesn’t resolve because of its holding regarding condition-
                                     ality), see op. Ct. note 4, the Commissioner argues that the
                                     Armstrongs didn’t comply with the attachment requirement
                                     because they attached to their tax return only the May 2003
                                     arbitration award, and not the March 2007 court order that
                                     Ms. Delaney actually signed.
                                        This immediately creates a problem for the Armstrongs
                                     because only the arbitrator, and neither Ms. Delaney nor Mr.
                                     Armstrong (nor anyone like a lawyer who might have been
                                     empowered to act on their behalf) signed this 2003 award,
                                     and section 152(e)(2) requires a signed declaration. This
                                     means that the unsigned 2003 arbitration award fails to
                                     transfer the dependency exemption from Ms. Delaney to the
                                     Armstrongs. If the record stopped here, the Armstrongs
                                     would lose. See, e.g., Himes v. Commissioner, T.C. Memo.
                                     2010–97, 2010 WL 1780877, at *2–*3 (holding an unsigned
                                     divorce decree is insufficient to transfer dependency exemp-
                                     tion); Neal v. Commissioner, T.C. Memo. 1999–97, 1999 WL




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                                     (468)                         ARMSTRONG v. COMMISSIONER                                     497


                                     167689, at *3 (finding unsigned Form 8332 insufficient to
                                     transfer dependency exemption).
                                        But—as has already been detailed—the record doesn’t stop
                                     here. The Armstrongs provided two additional relevant docu-
                                     ments to the Commissioner during the examination of their
                                     2007 tax return, including the 2007 child support order that
                                     is at the core of the dispute over conditionality.
                                        The Commissioner says that the 2007 order fails—not only
                                     on the conditionality issue—but also because the Armstrongs
                                     didn’t attach it to their return. Like the conditionality argu-
                                     ment, the Commissioner’s position regarding attachment has
                                     some support in our caselaw, but not in any precedential
                                     Opinion. So as with the conditionality issue, I would take a
                                     closer look.
                                        Section 152(e)(2)(B) specifically commands that ‘‘the non-
                                     custodial parent attach[ ] such written declaration to the non-
                                     custodial parent’s return for the taxable year.’’ This might
                                     seem to have an obvious meaning—at first glance ‘‘attach’’
                                     might mean something like ‘‘staple’’ or ‘‘bind with a paper
                                     clip’’ or some other synonym connoting ‘‘physically fasten.’’
                                     Judge Goeke thinks so, and in his concurrence says that this
                                     means the Armstrongs ‘‘[c]learly * * * did not ‘attach’ the
                                     relevant document to their return.’’ See concurring op. p. 479.
                                        But that’s not the only meaning of the word and, in an age
                                     where the IRS strongly encourages filers, especially middle-
                                     income filers with relatively simple returns, to file electroni-
                                     cally, see Internal Revenue Restructuring and Reform Act of
                                     1998, Pub. L. No. 105–206, sec. 2001(a), 112 Stat. at 723
                                     (establishing a goal for electronic filing of at least 80% of
                                     Federal tax and information returns by 2007), I explore in
                                     more detail that simple word.
                                        Like any other word in the Code, we normally would give
                                     ‘‘attach’’ its plain meaning. See Armstrong v. Commissioner,
                                     99 T.C. 506, 507 (1992), aff ’d, 15 F.3d 970 (10th Cir. 1994).
                                     According to Webster’s Third New International Dictionary
                                     140 (1961), however, ‘‘attach’’ has more than one:
                                        • ‘‘connect: place so as to belong’’ (as in through marriage,
                                     he attached himself to the Catholic faith);
                                        • ‘‘to fasten (itself)’’ (as in though his resume omitted the
                                     details, the sordid details of his embezzlement conviction were
                                     firmly attached to his reputation);




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                                     498                 139 UNITED STATES TAX COURT REPORTS                                          (468)


                                       • ‘‘make fast or join (as by string or glue)’’ (as in with the
                                     driver side door no longer attached to his car, Bill found the
                                     heating unit wholly ineffective); or
                                       • ‘‘to connect by attribution’’ (as in please see the attached
                                     Word document). 11
                                     It makes a big difference to the Armstrongs if ‘‘attach’’ means
                                     ‘‘physically fastened’’ and not simply ‘‘connected’’. Since the
                                     plain meanings vary so widely, and lead to such different
                                     outcomes here, I would look elsewhere for guidance. 12
                                        Since the meaning of the word ‘‘attach’’ isn’t plain, I start
                                     with legislative history, which can be a good lexicographical
                                     source. See Intermountain Ins. Serv. of Vail, LLC v. Commis-
                                     sioner, 134 T.C. 211, 237–38 (2010) (Halpern and Holmes,
                                     JJ., concurring in the result), rev’d on other grounds, 650
                                     F.3d 691 (D.C. Cir. 2011), vacated and remanded, 566 U.S.
                                     ll, 132 S. Ct. 2120 (2012).
                                        Congress appears to have intended that ‘‘[w]here one of the
                                     parents claims the deduction with respect to a child pursuant
                                     to a written agreement between them, the Treasury Depart-
                                     ment may require that reasonable substantiation of the exist-
                                     ence of the written agreement be submitted with his tax
                                     return.’’ H.R. Rept. No. 90–102, at 1529, 1967–2 C.B. at 592
                                     (emphasis added). It also delegated authority to the Sec-
                                     retary to issue regulations, see id., which he did in 1971.
                                     They provide that:
                                     [I]n the case of a written agreement * * * between the parents which allo-
                                     cates the deduction to the noncustodial parent, the noncustodial parent
                                        11 Webster’s Third New International Dictionary is widely regarded as a ‘‘descriptive’’ dic-

                                     tionary—one that describes various word usages without prescribing any. See Phillip A. Rubin,
                                     ‘‘War of the Words: How Courts Can Use Dictionaries in Accordance with Textualist Principles’’,
                                     60 Duke L.J. 167, 183–84 (2010). Lexicographers still debate whether the descriptive approach
                                     taken by Webster’s Third is more appropriate than a ‘‘prescriptive’’ approach—one emphasizing
                                     the ‘‘proper’’ use of words—as employed by other respected dictionaries, such as The American
                                     Heritage Dictionary. See id. at 183–84 n.105.
                                        For what it’s worth, the two dictionaries track each other as to the meaning of ‘‘attach’’. The
                                     American Heritage Dictionary of the English Language 115 (5th ed. 2011), in relevant part, de-
                                     fines attach as: (1) ‘‘To fasten, secure, or join’’ (as in ‘‘attached the wires to the post’’); (2) ‘‘To
                                     connect as an adjunct or associated condition or part’’ (as in ‘‘Many major issues are attached
                                     to this legislation’’); (3) ‘‘To affix or append; add’’ (as in ‘‘attached several riders to the docu-
                                     ment’’); (4) ‘‘To ascribe or assign’’ (as in ‘‘attached no significance to the threat’’); (5) ‘‘To bind
                                     by emotional ties, as of affection or loyalty’’ (as in ‘‘I am attached to my family’’); and (6) ‘‘To
                                     adhere, belong, or relate’’ (as in ‘‘Very little prestige attaches to this position’’).
                                        12 The Supreme Court has used dictionaries to ‘‘provide potential meanings from which the

                                     Court would select based on statutory purpose, legislative intent, common sense, or some other
                                     contextual argument.’’ See Note, ‘‘Looking It Up: Dictionaries and Statutory Interpretation,’’ 107
                                     Harv. L. Rev. 1437, 1439 (1994).




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                                     (468)                         ARMSTRONG v. COMMISSIONER                                     499


                                     must attach to his return (or amended return) a copy of such agreement
                                     * * * which is applicable to the calendar year in which the taxable year
                                     of the noncustodial parent begins. [Sec. 1.152–4(d)(2), Income Tax Regs.
                                     (as amended by T.D. 7099, 1971–7 C.B. 45, 47); emphasis added.]

                                     Section 152(e)(2) and its regulations remained substantially
                                     unchanged until Congress enacted DEFRA in 1984. See DEFRA
                                     sec. 423, 98 Stat. at 799. As I detailed above, Congress col-
                                     lapsed two exceptions into one, substituting more or less the
                                     language of section 152(e) as it is today.
                                       The Secretary followed this lead and issued a new tem-
                                     porary regulation that reflected the changes to section
                                     152(e)(2):
                                     Q–3 How may the exemption for a dependent child be claimed by a non-
                                     custodial parent?
                                     A–3 A noncustodial parent may claim the exemption for a dependent child
                                     only if the noncustodial parent attaches to his/her income tax return for
                                     the year of the exemption a written declaration from the custodial parent
                                     stating that he/she will not claim the child as a dependent for the taxable
                                     year beginning in such calendar year. The written declaration may be
                                     made on a form to be provided by the Service for this purpose. Once the
                                     Service has released the form, any declaration made other than on the offi-
                                     cial form shall conform to the substance of such form.
                                       [Sec. 1.152–4T(a), Q&A–3, Temporary Income Tax Regs., supra.]

                                       One theme that emerges from this mixed history is that
                                     Congress and the Commissioner grew increasingly concerned
                                     about inefficiencies and uncertainties surrounding the
                                     dependency exemption, seeking to avoid expensive litigation
                                     where there was ‘‘little tax revenue at stake.’’ H.R. Rept. No.
                                     98–432 (Part 2), supra at 1498–99, 1984 U.S.C.C.A.N. at
                                     1139–40. Adopting the narrowest meaning of ‘‘attaches’’—i.e.,
                                     physically fastens to—would advance efficiency because the
                                     IRS could, for example, decide to deny exemptions to every
                                     noncustodial parent who efiled and there might be nothing a
                                     court could do about it. And the fact that the term entered
                                     the Code when the World Wide Web was little more than a
                                     pixel on Timothy Berners-Lee’s mental monitor might mean
                                     taxpayers are stuck with a meaning of ‘‘attaches’’ as ‘‘phys-
                                     ically fastens contemporaneously with filing.’’
                                       But I think that there is a better reading.
                                       Congress itself referred to ‘‘reasonable substantiation,’’ see
                                     H.R. Rept. No. 90–102, at 1529, 1967–2 C.B. at 592
                                     (emphasis added), and the Commissioner’s nod to ‘‘amended




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                                     500                 139 UNITED STATES TAX COURT REPORTS                                        (468)


                                     return[s]’’ indicates that the possibility of noncontempora-
                                     neous ‘‘attachment’’ has always existed, see sec. 1.152–4(d)(2),
                                     Income Tax Regs. (as amended by T.D. 7099, 1971–1 C.B. at
                                     46) (emphasis added). This is especially suggestive because
                                     amended returns are not returns that the Commissioner has
                                     to accept, and are often little more than claims for a refund.
                                     See Koch v. Alexander, 561 F.2d 1115, 1117 (4th Cir. 1977)
                                     (no statutory mandate for Commissioner to accept amended
                                     returns); Goldstone v. Commissioner, 65 T.C. 113, 115 (1975)
                                     (rejecting taxpayers’ argument that they have the ‘‘right’’ to
                                     file an amended return); sec. 301.6402–3(a)(5), Proced. &
                                     Admin. Regs. (properly executed amended return treated as
                                     claim for refund). And later congressional comments about
                                     the problems with old section 152(e)’s income-support thresh-
                                     olds and dueling claims about which parent provided the
                                     greater amount of support likewise undercut any conclusion
                                     that ‘‘attaches’’ had only a narrow meaning in 1984. See H.R.
                                     Rept. No. 98–432 (Part 2), supra at 1498–99, 1984
                                     U.S.C.C.A.N. at 1139–41. This should make one reluctant to
                                     read ‘‘attaches’’ as having a plain meaning, especially when
                                     doing so would deprive the Secretary of discretion under the
                                     first step of Chevron to adopt a broader reading and would
                                     put well-meaning but unsophisticated and unrepresented
                                     taxpayers at a great disadvantage.
                                        But if the dictionary and legislative history don’t compel a
                                     narrow reading, and there is no regulation defining the word,
                                     where else could one turn? The Code does not define
                                     ‘‘attach’’, and has few references to the term. 13 These sec-
                                     tions unfortunately emit no more light than the legislative
                                     history. Other Code sections appear to give ‘‘attach’’ a variety
                                     of meanings.
                                        Some, such as current section 36(d)(4), are quite strict.
                                     Section 36 provides first-time homebuyers a credit for part of
                                     the purchase price of their qualifying principal residence.
                                     Subsection (d)(4) specifies that ‘‘[n]o credit * * * shall be
                                     allowed to any taxpayer for any taxable year’’ if ‘‘the tax-
                                     payer fails to attach to the return of tax for such taxable year
                                       13 In the sense in which the word is used in section 152(e)(2)(B), I can find only fifteen current

                                     Code references to ‘‘attach’’ or ‘‘attachment’’: six in subtitle A, see secs. 36(d)(4), 152(e)(2)(B),
                                     170(f)(11)(C) and (D), 274(h)(5), 646(c)(2)(B), 860(e)(4); one in subtitle B, see sec. 2001(f)(2); and
                                     eight in subtitle F, see secs. 6038D(a), 6103(b)(1), 6114(a)(1), 6213(g)(2)(P)(iii), 6501(c)(9),
                                     6611(g)(2)(B)(ii), 6662(d)(2)(B)(ii)(I), 7477(a).




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                                     (468)                         ARMSTRONG v. COMMISSIONER                                     501


                                     a properly executed copy of the settlement statement used to
                                     complete such purchase.’’ Sec. 36(d)(4) (as amended by the
                                     Worker, Homeownership, and Business Assistance Act of
                                     2009, Pub. L. No. 111–92, sec. 12(b), 123 Stat. at 2991)
                                     (emphasis added). Current section 6213 allows the Commis-
                                     sioner to summarily assess a tax deficiency arising from a
                                     taxpayer’s failure to attach the settlement statement. See
                                     sec. 6213(b), (g)(2)(P)(iii) (as amended by the Worker,
                                     Homeownership, and Business Assistance Act of 2009 sec.
                                     12(b)). And while Congress hasn’t further clarified section
                                     36(d)(4)’s attachment requirement, the National Taxpayer
                                     Advocate, in testimony before the Senate Finance Com-
                                     mittee, noted that section 36(d)(4)’s requirement of upfront
                                     substantiation to get the first-time homebuyer credit is
                                     burdensome and may reduce taxpayer participation. See
                                     Complexity and the Tax Gap: Making Tax Compliance Easier
                                     and Collecting What’s Due: Hearing Before the S. Comm. on
                                     Fin., 112th Cong. 31 (2011) (statement of Nina E. Olson,
                                     National Taxpayer Advocate).
                                        Likewise, the December 2011 revision of the form given by
                                     the Commissioner to claim the credit, Form 5405, First-Time
                                     Homebuyer Credit and Repayment of the Credit, warns tax-
                                     payers about the credit’s strict requirements: ‘‘Caution! You
                                     must attach a copy of the properly executed settlement state-
                                     ment (or similar documentation) used to complete the pur-
                                     chase (see instructions).’’ The accompanying instructions add
                                     that a taxpayer filing a return claiming the section 36(d)(4)
                                     credit ‘‘must file on paper and attach all required documenta-
                                     tion.’’
                                        Other sections are much looser. Section 170, for instance,
                                     allows taxpayers a deduction for their charitable contribu-
                                     tions. Subsection (f)(11), however, generally disallows a
                                     deduction for any contribution of more that $500 unless the
                                     taxpayer substantiates the gift. See sec. 170(f)(11)(A). Sub-
                                     paragraphs (C) and (D) of section 170(f)(11) go further: They
                                     disallow the deduction unless the taxpayer ‘‘attaches’’ a
                                     qualified appraisal to his tax return. See sec. 170(f)(11)(C)
                                     and (D). But taxpayers needn’t fasten this qualified appraisal
                                     to claim their deduction—so long as they provide it to the
                                     Commissioner within 90 days of his asking for it. See sec.
                                     1.170A–13(c)(4)(iv)(H), Income Tax Regs. Here, ‘‘attach’’




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                                     502                 139 UNITED STATES TAX COURT REPORTS                                     (468)


                                     doesn’t mean ‘‘fasten’’—unlike what seems to be the case
                                     with current section 36(d)(4).
                                        I think it helpful, on this subject where Congress seems to
                                     have been concerned about administrability, to also look at
                                     the IRM. Two sections of the IRM in effect when the Arm-
                                     strongs filed their return and when they were audited seem
                                     particularly important to solving our problem. 14
                                        IRM pt. 21.6.1.4.2 (Oct. 1, 2007) explains the Commis-
                                     sioner’s general procedures when dealing with ‘‘[r]eturns
                                     [w]ith [m]issing [i]nformation.’’ It instructs return reviewers
                                     to ‘‘request[ ] the necessary information if * * * [s]upporting
                                     forms, schedules, or documents are missing.’’ 15 See id.
                                     Another part of the IRM dealing with dependency exemptions
                                     is even more explicit:
                                     IRM 21.6.1.5.8 (10–01–2002)
                                     Verifying Form 8332 Procedure

                                                           *    *   *    *   *   *    *
                                     3. Upon receipt of a math error notice response concerning a missing or
                                     incomplete Form 8332 (or similar statement) take the following actions:

                                                           *   *   *   *   *    *   *
                                     C. Correspond with the noncustodial parent; enclose a blank Form 8332.
                                     D. Request taxpayer to complete and return the Form 8332, signed by the
                                     custodial parent.
                                     E. Tell taxpayer IRS will reconsider the request when the appropriate
                                     information is provided.

                                                             *   *  *    *   *   *  *
                                     5. If taxpayer provides the appropriate documentation, allow the exemp-
                                     tion * * *

                                       The IRS has consistently followed such practices. 16 Around
                                     the time section 152 was amended, the IRM Classi-
                                        14 I am aware that the IRS Office of Chief Counsel has taken the position that section

                                     6330(c)(1)’s requirement that an Appeals officer obtain ‘‘verification that ‘the requirements of
                                     any applicable law or administrative procedure have been met’ ’’ in collection cases includes
                                     verification that the IRS followed procedures the IRM requires. Chief Counsel Advice 201212018
                                     (Mar. 23, 2012); see also Trout v. Commissioner, 131 T.C. 239, 257–62 (2008) (Marvel, J., concur-
                                     ring).
                                        15 The IRM clarifies that returns with potential statute-of-limitations problems are ‘‘never re-

                                     turned to the taxpayer.’’ IRM pt. 21.6.1.4.2 (Oct. 1, 2007). We don’t have this problem here: The
                                     Commissioner was well within the general three-year limitations period when the Armstrongs
                                     filed their petition with this Court.
                                        16 The IRS seems to have followed this practice of requesting additional information regarding

                                     a taxpayer’s entitlement to a dependency exemption where it hadn’t already been provided. See
                                     King v. Commissioner, 121 T.C. 245, 246–47 (2003) (noting the IRS requested a Form 8332 for




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                                     (468)                         ARMSTRONG v. COMMISSIONER                                     503


                                     fication Handbook 17 contained ‘‘[s]tandard [i]nformation
                                     [p]aragraphs,’’ which solicited information from taxpayers
                                     ‘‘[t]o help [the IRS] complete the examination’’ of their tax
                                     returns. IRM pt. 41(12)0, Classification Handbook, ex. 900–2
                                     (May 9, 1994). With regard to a claim for ‘‘other depend-
                                     ents’’—dependents for whom the taxpayer lacked custody—
                                     the IRS would request a copy of ‘‘any written agreement
                                     stating which parent will have custody and/or claim the
                                     dependency exemption’’ or a Form 8332 ‘‘or similar state-
                                     ment.’’ See id.
                                         Current IRS procedure also underscores the Commissioner’s
                                     interpretation of ‘‘attach’’. The IRM part dealing with ‘‘[l]oose
                                     [s]chedules’’ 18 says they are not rejected outright but are
                                     associated (or reassociated) with the return they relate to:
                                     2. Upon receipt of a loose schedule * * * do one of the following:

                                                             *   *   *   *   *   *    *
                                     C. If you want the loose schedule attached to the original return and not
                                     returned to you, enter the employee number for Files * * *

                                                             *    *    *    *  *    *   *
                                     E. If the loose schedule relates to a prior year return or for a return that
                                     should have already posted, research for DLN. If DLN is found, enter it
                                     on the schedule and route it to Return Files function to associate with
                                     return. If DLN is NOT found, return the loose schedule to taxpayer.
                                       [IRM pt. 21.3.3.5.2 (Dec. 8, 2010). 19]

                                     In these subsections, ‘‘attached’’ is synonymous with ‘‘associ-
                                     ated’’—subsection (2)(C) mentions loose schedules’ being sent
                                     to ‘‘Files’’ to be ‘‘attached’’ with their return, and subsection
                                     (2)(E) describes loose schedules for prior year returns’ being
                                     sent to ‘‘Files’’ to be ‘‘associate[d]’’ with their return. See id.
                                     In an age of email and efiling, with physical documents con-
                                     verted into electrons and sent instantaneously across the
                                     world, the Commissioner can hardly be faulted for taking
                                     such a pragmatic view. 20
                                     tax year 1987 after the taxpayer had filed the return claiming the dependency exemption).
                                       17 IRS examiners assigned to classification were required to follow the IRM Classification

                                     Handbook. IRM pt. 41(12)0 (Nov. 1, 1984).
                                       18 Loose schedules are schedules ‘‘that have inadvertently been detached from, or cannot be

                                     associated with, a return * * * [or have been] received from taxpayers without sufficient infor-
                                     mation to indicate why they have been sent.’’ IRM pt. 21.3.3.5.2 (Dec. 8, 2010) (emphasis added).
                                       19 DLN means ‘‘document locator number’’ in taxspeak. See, e.g., Kovacevich v. Commissioner,

                                     T.C. Memo. 2009–160, 2009 WL 1916351, at *8.
                                       20 The Commissioner even has a form, Form 8453, U.S. Individual Income Tax Transmittal

                                                                                                  Continued




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                                     504                 139 UNITED STATES TAX COURT REPORTS                                    (468)


                                        These sections indicate that, informally at least, the
                                     Commissioner adopts a less rigid definition of ‘‘attach’’—not
                                     just ‘‘fastened’’ but ‘‘associated with’’ or ‘‘connected to by
                                     attribution.’’ I believe the part of the IRS bureaucracy that
                                     handles the processing of returns has a perfectly reasonable
                                     understanding of the word. For purposes of section 152(e)(2),
                                     this less-rigid definition of attach would not undermine the
                                     clarity of the law, and it would allow legitimate taxpayer
                                     claims to be heard and evaluated—without substantially
                                     impairing the efficiency of the Commissioner’s processing and
                                     collection activities. I am mindful that we generally should
                                     construe deductions narrowly. INDOPCO, Inc. v. Commis-
                                     sioner, 503 U.S. 79, 84 (1992). But we aren’t confronted here
                                     with the scope of a deduction: We address only a procedural
                                     rule for examining whether a taxpayer may claim the section
                                     152(e)(2) exemption.
                                        That again leaves our nonprecedential caselaw. We have
                                     consistently noted section 152(e)(2)’s attachment require-
                                     ment. See, e.g., Himes, 2010 WL 1780877, at *2; Neal, 1999
                                     WL 167689, at *3–*4. And I agree with Judge Goeke that we
                                     have plenty of nonprecedential caselaw implicitly defining
                                     ‘‘attach’’ as ‘‘physically fasten to.’’ In many cases involving
                                     section 152(e)(2), a taxpayer failed to staple a Form 8332 or
                                     declaration to his return but then provided additional sup-
                                     port during audit or trial. We’ve looked at this additional
                                     documentation but concluded that, even if we considered it,
                                     it didn’t comply with section 152(e)(2)’s other requirements.
                                     See, e.g., Santana, 2012 WL 571284, at *2; Norwood v.
                                     Commissioner, T.C. Memo. 2003–63, 2003 WL 751016, at *3;
                                     Horn, 2002 WL 31662270, at *1–*2. In other cases, however,
                                     we’ve refused to look at the later-provided materials not fas-
                                     tened to the initial tax return. See, e.g., Espinoza v. Commis-
                                     sioner, T.C. Memo. 2011–108, 2011 WL 1989733, at *1–*2
                                     (taxpayer provided permanent order of child support, but we
                                     didn’t analyze whether it satisfied section 152(e)(2) require-
                                     ments); Brissett v. Commissioner, T.C. Memo. 2003–310,
                                     2003 WL 22520105, at *1, *3 (taxpayer provided voluntary
                                     separation and property settlement agreement, but we didn’t
                                     for an IRS e-file Return, that he uses for paper tax forms like the Form 8332 that have to be
                                     ‘‘associated with’’ their electronically filed returns. See TIGTA Rept. 2006–30–160, ‘‘Requiring
                                     Personal Identification Numbers for Electronically Filed Returns Could Improve Tax Adminis-
                                     tration and Reduce Costs’’, Doc 2006–20471, 2006 TNT 192–22 (Sept. 2006).




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                                     (468)                         ARMSTRONG v. COMMISSIONER                                     505


                                     analyze whether it satisfied section 152(e)(2) requirements).
                                     We didn’t parse ‘‘attaches’’ in these cases, and it appears—
                                     as is so often true in subjects where pro se taxpayers
                                     predominate—that we did not have any argument from any
                                     of the parties in any of the cases about broad or narrow
                                     readings of the word. We appear to have simply assumed a
                                     narrow reading—‘‘attaches’’ as ‘‘contemporaneously fas-
                                     tens’’—and applied that reading to the facts of the case at
                                     hand.
                                        In only a few cases did we address the attachment require-
                                     ment head on. In Chamberlain v. Commissioner, T.C. Memo.
                                     2007–178, 2007 WL 1953154, at *1, the taxpayer attached to
                                     his 1995 income tax return an original copy of an executed
                                     Form 8332 releasing his ex-wife’s claim to the dependency
                                     deductions for all future years. A fire then destroyed all his
                                     copies of the document, and in later years he included a note
                                     with his income tax return referring to the original form. See
                                     id. The Commissioner didn’t challenge Chamberlain’s claim
                                     to a dependency exemption, despite his failure to attach a
                                     copy of the form to his tax returns for any of the years
                                     between 1996 and 2002. See id. Things changed in 2003: His
                                     ex-wife also claimed the exemption that year, and the
                                     Commissioner rejected Chamberlain’s exemption claim to
                                     avoid getting whipsawed. See id. Chamberlain challenged the
                                     Commissioner’s determination and produced at trial a letter
                                     from his ex-wife confirming the prior existence of the Form
                                     8332, even though he couldn’t locate a copy. See id., 2007 WL
                                     1953154, at *3. While sympathetic to his plight, we sided
                                     with the Commissioner, holding that his note and letter
                                     didn’t satisfy section 152(e)(2) and the prior existence of a
                                     Form 8332 didn’t matter—he needed to attach a copy of it
                                     every year to his tax return or he couldn’t take the exemp-
                                     tion. See id.
                                        Chamberlain is distinguishable from this case. We are not
                                     dealing with the problems caused by the destruction of
                                     important records, but instead the problem of whether an
                                     existing record complies with the manner-and-form require-
                                     ments of section 152(e)(2). Whereas Chamberlain produced
                                     no additional forms or declarations at or before trial, the
                                     Armstrongs gave the Commissioner the 2003 child support
                                     order and its 2007 modification. Chamberlain can just as




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                                     506                 139 UNITED STATES TAX COURT REPORTS                                    (468)


                                     easily be seen as a failure-of-proof case as it can be read for
                                     a narrow reading of ‘‘attaches’’.
                                        Presley v. Commissioner, T.C. Memo. 1996–553, 1996 WL
                                     732832, also tackled the attachment issue. The taxpayer
                                     there apparently claimed the dependency exemption without
                                     providing any supporting documentation. See id., 1996 WL
                                     732832, at *2. He provided an executed Form 8332 at trial,
                                     but the Form was dated February 8, 1994—almost a year
                                     after the day he filed his income tax return. See id. We
                                     refused to accept the late Form 8332 because it wasn’t
                                     attached to his return and was dated after he filed the rel-
                                     evant tax return. See id. I would view this rejection as akin
                                     to our reluctance to accept after-the-fact evidence purporting
                                     to substantiate various business expenses—unless a record is
                                     contemporaneous, we can’t be sure it accurately reflects
                                     conditions as they existed at the time the expense was
                                     incurred. See Barton v. Commissioner, T.C. Memo. 2005–97,
                                     2005 WL 1022957, at *3–*4 (expressing ‘‘skeptic[ism]’’ over
                                     allegedly substantiating records that were ‘‘reconstructed
                                     * * * over 2 years after the year in issue’’).
                                        Mr. Armstrong didn’t create a record after his case had
                                     begun. Instead, he dug out records the IRS asked for—the
                                     2003 and 2007 child support orders—both of which were in
                                     effect when he filed his 2007 income tax return.
                                        I would hold that ‘‘attaches’’ in section 152(e) means
                                     ‘‘associates with’’ or ‘‘connects to by attribution.’’ I am con-
                                     vinced that this is the most reasonable way to read the sec-
                                     tion in light of the regulations contemporaneous with the
                                     amendment that suggest that attachment to a later filed
                                     amended return would suffice, the current administrative
                                     practice that encourages IRS agents to ask taxpayers for
                                     missing Forms 8332 when those forms are not physically fas-
                                     tened to the original return, and the practical impossibility
                                     of such a narrow reading in an era where the IRS is publicly
                                     and successfully encouraging taxpayers to file electronically.
                                     This construction of ‘‘attaches’’ goes against nothing either
                                     Congress or the Secretary has said. If either wishes to clarify
                                     through amendment to the Code or by regulation what
                                     ‘‘attaches’’ means, either is free to do so. Until then, I would
                                     understand the term to mean providing a Form 8332 or
                                     similar declaration to the Commissioner or this Court within




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                                     (468)                         ARMSTRONG v. COMMISSIONER                                     507


                                     the time for submitting materials that can be ‘‘associated
                                     with’’ a given return in a case before us.
                                        It is one of the great theorems of law that if all sides are
                                     rational actors with perfect knowledge and zero transaction
                                     costs, the allocation of resources—even including exemptions,
                                     child tax credits, and the like—would be the same regardless
                                     of the rules we choose. See Ronald H. Coase, ‘‘The Problem
                                     of Social Cost’’, 3 J.L. & Econ. 1 (1960). But in our fallen
                                     world, there are few stages on which rational actors are more
                                     outpeopled by the children of wrath than in domestic-rela-
                                     tions law. The rest of the Court solves this case with a rule
                                     drawn against any taxpayer who tries to use, as the substan-
                                     tial equivalent of a Form 8332, a divorce decree or separation
                                     agreement in which the allocation of a dependency exemption
                                     includes a condition. This is a bright line. Bright lines are
                                     usually a good thing for tax law, which is speckled with
                                     multifactor tests for everything from the definition of an
                                     employee, see, e.g., Ewens & Miller, Inc. v. Commissioner,
                                     117 T.C. 263, 270 (2001) (seven factors), to whether a trans-
                                     action is a sale, see, e.g., Grodt & McKay Realty, Inc. v.
                                     Commissioner, 77 T.C. 1221, 1237–38 (1981) (eight factors),
                                     to the equity of granting innocent-spouse relief, see, e.g.,
                                     Henson v. Commissioner, T.C. Memo. 2012–288, 2012 WL
                                     4815166, at *6–*7 (applying factors listed in Rev. Proc. 2003–
                                     61, sec. 4.03, 2003–2 C.B. at 298–299) (at least eight factors),
                                     to figuring out whether an activity is engaged in for profit,
                                     see, e.g., Foster v. Commissioner, T.C. Memo. 2012–207, 2012
                                     WL 3000350, at *5 (applying factors listed in sec. 1.183–2(b),
                                     Income Tax Regs.) (nine factors), and to deciding if a tax-
                                     payer committed fraud, see, e.g., Niedringhaus v. Commis-
                                     sioner, 99 T.C. 202, 211 (1992) (eleven factors).
                                        Maybe, with the bright line we draw today, more separated
                                     parents will hire escrow agents to manage the flow of Forms
                                     8332. See Robert S. Taft, Tax Aspects of Divorce and Separa-
                                     tion, sec. 5A.02[1], at 5A–14 n.14 (rev. 2005) (suggesting that
                                     custodial parent execute Forms 8332 to be held in escrow
                                     until a third party verifies timely payment of child support).
                                     Maybe state courts will grant the Mr. Armstrongs of the
                                     world a right to offset their future child-support payments
                                     with the value of the tax benefits they have unjustly been
                                     denied. But see supra note 5. Maybe we will see more grue-
                                     some spectacles of contempt and threats of jail like that we




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                                     508                 139 UNITED STATES TAX COURT REPORTS                                    (468)


                                     describe in George v. Commissioner, 139 T.C. 508 (2012). Or
                                     maybe the Secretary, Congress, or our reviewing courts will
                                     decide that the more reasonable course is to read the Code
                                     to ensure that conditions on allocating the tax benefits of
                                     parenthood—conditions that Congress expected to continue
                                     when it enacted section 152(e), conditions that several states
                                     require as part of their family law, and conditions that par-
                                     ents assume in good faith are enforceable and effective will,
                                     if a parent like Mr. Armstrong fulfills them, be honored. I
                                     would have held that the Armstrongs attached the 2007
                                     state-court order—a declaration that, in my view, conformed
                                     to the substance of Form 8332—to their return and would
                                     have allowed them to take the dependency exemption for
                                     C.E. in 2007.
                                        I respectfully dissent.
                                        HALPERN and VASQUEZ, JJ., agree with this dissent.

                                                                               f




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