Chapter 4

Question 1

Custodial Parent

Answer 1

The parent with whom a child lived for the greater number of nights during the year. A custodial parent for tax purposes may differ from a custodial parent identified in a divorce decree based on circumstances.

Question 2

Dependent

Answer 2

An individual who may be claimed on another person’s income tax return. To be claimed as a dependent, a person must meet the qualifying child or qualifying relative test

Question 3

Eligible foster child

Answer 3

A child other than the taxpayer’s biological child, stepchild, or adopted child, who was placed with the taxpayer by an authorized placement agency or by a court order, decree, or judgment.

Question 4

Full-time student

Answer 4

An agreement between taxpayers who collectively provide at least 50% of a dependent relative’s support. The agreement allows one of the taxpayers to claim the dependent if they provide at least 10% of the support, even though that taxpayer does not provide more than 50% of the support for the otherwise qualifying relative. All the others who furnish at least 10% of the support file written declarations that they will not claim the individual for that taxable year. Form 2120 is used for this purpose.

Question 5

Noncustodial Parent

Answer 5

The parent who is not the custodial parent of the child.

Question 6

Permanent and Total Disability

Answer 6

A disability that prevents an individual from engaging in any substantial, gainful activity because of a medically determined physical or mental impairment expected to result in death, or that has lasted, or is expected to last, for a continuous period of not less than 12 months.

Question 7

Physical Custody

Answer 7

The taxpayer with whom a child lives is considered to have physical custody, regardless of who has nominal legal custody.

Question 8

Principal Place of Abode (Principal Residence)

Answer 8

The place an individual considers to be their permanent home. A person’s abode does not change when they are temporarily absent due to illness, school, military service, etc., as long as their living area is maintained, and they can reasonably be expected to return home after the temporary absence.

Question 9

Qualifying Child (QC)

Answer 9

A child who meets the relationship, age, residency, support, joint return, and special tests with regard to a taxpayer to determine the taxpayer’s eligibility to claim the Child Tax Credit, Earned Income Credit, or Child and Dependent Care Credit with regard to the child, or to use the head of household filing status.

Question 10

Qualifying Relative

Answer 10

A person who (1) bears a certain relationship to the taxpayer; (2) for whom the taxpayer provides more than one-half support for the year; (3) whose gross income for the year is less than $4,200 for 2019; and (4) who is not claimed as a qualifying child of any taxpayer.

Question 11

Support

Answer 11

The total amount provided on behalf of an individual. Support includes food, lodging, and other necessities, as well as recreation and other nonessential expenditures. Support is not limited to necessities and can be as lavish as the taxpayer can afford.

Question 12

What are the four tests that an individual must satisfy in order to be claimed as a Qualifying Relative?

Answer 12

Not a qualifying child test.
Relationship or member of the household test.
Gross income test.
Support test.

Question 13

Not a Qualifying Child Test

Answer 13

To meet this test, the potential dependent must not be the qualifying child of the taxpayer or of any other taxpayer. A potential dependent who is a qualifying child of one taxpayer cannot be claimed as a qualifying relative by another taxpayer.

Question 14

Qualifying Relative Relationship or Member of the Household Test

Answer 14

The relationship test for a qualifying relative is broader than the test for a qualifying child. The individual must meet one of the following two requirements:

Is related to the taxpayer in one of the following ways:
The taxpayer’s child (includes biological and adopted children, plus descendants of either), foster child, stepchild, sibling, step-sibling, or half sibling.
The taxpayer’s parent, grandparent, father- or mother-in-law, stepparent, aunt or uncle, niece or nephew, brother- or sister-in-law, or son- or daughter-in-law.

2. Lived with the taxpayer the entire year.
   If the taxpayer files a joint return, the person can be related to either the taxpayer or their spouse. For example, a spouse’s uncle who receives more than half of his support from the taxpayer may be claimed as the taxpayer’s qualifying relative, even though the uncle does not live with the married couple. However, if the taxpayer and their spouse file separate returns, the spouse’s uncle can only meet the relative test if the spouse’s uncle lives with the taxpayer all year.

A taxpayer does not meet this test if, at any time during the year, the relationship between the taxpayer and the potential dependent violates local law.

The relationship or member of household test has caused a lot of confusion with tax preparers. It is important to realize this test is a choice between the two options. The potential dependent either passes with being one of the required relationships, or they pass the member of the household part and live with the taxpayer the entire year.

Question 15

Gross Income Test for Qualifying Relative

Answer 15

If the potential dependent has gross income, it must be less than $4,200 for 2019.

Question 16

Support Test for Qualifying Relative

Answer 16

the support test for a qualifying relative is different than for a qualifying child. The taxpayer must provide over one-half of the support for the potential dependent to satisfy the test to be a qualifying relative.

Remember, a potential dependent’s own funds are not counted as support, unless they actually spent those funds on supporting themselves.

In figuring a potential dependent’s total support, include tax-exempt income, savings, and borrowed amounts used to support that person. Tax-exempt income includes certain social security benefits, welfare benefits, nontaxable life insurance proceeds, Armed Forces family allotments, nontaxable pensions, and tax-exempt interest.

If a child receives social security benefits and uses them toward their own support, the benefits are considered as provided by the child.

Question 17

For an individual to be a qualifying child (QC) of a taxpayer, an individual must meet five tests:

Answer 17

Relationship.
Age.
Residency.
Support.
Joint return.

Question 18

Relationship Test for Qualifying Child

Answer 18

In order to satisfy the relationship test, an individual must be related to the taxpayer in one of the following ways:

Son or daughter.
Brother or sister.
Adopted child.
Eligible foster child.
A descendant of any of these (this includes all grandchildren, nieces, and nephews).

Stepsons, stepdaughters, stepbrothers, and stepsisters all satisfy the relationship test. Half brothers, half sisters, and their descendants also meet this requirement.

Adopted children satisfy the test, even if the adoption is not yet final, provided the child has been lawfully placed for adoption with the taxpayer. A foster child must be placed with the taxpayer by an authorized placement agency or by judgment, decree, or other order of any court of competent jurisdiction.

Question 19

Age Test for Qualifying Child

Answer 19

To meet this test, the child must meet one of the following tests:

Under age 19 at the end of the year and younger than the taxpayer (or the taxpayer’s spouse, if filing jointly).
A full-time student under age 24 at the end of the year and younger than the taxpayer (or the taxpayer’s spouse, if filing jointly). A full-time student is defined as being full-time according to the institution for any part of five calendar months during the year.
Permanently and totally disabled at any time during the year, regardless of age.

Question 20

Residency Test

Answer 20

The residency test is satisfied if the individual lived with the taxpayer for more than six months of the year. An individual who was born or died during the year is considered to have met this test, regardless of how long they lived with the taxpayer, provided they lived with the taxpayer for half of the time they were alive during 2019.

There are exceptions for children who were kidnapped or temporarily absent from the home. Attending college is an example of a temporary absence. There are also exceptions for children of divorced or separated parents. Your instructor will be discussing examples of temporary absences in your next class. In the text box below, list some types of temporary absences children might have (e.g., attending college), and be ready to share your ideas during the class discussion.

Question 21

Support Test for Qualifying Child

Answer 21

An individual cannot have provided more than one-half of their own support during the tax year.

Payments received for the support of a foster child from a child placement agency are considered support provided by the agency. Similarly, payments received for the support of a foster child from a state or county are considered support provided by the state or county. A person’s own funds are not support unless they are actually spent for support. Thus, if money is put in savings and not used for support, it does not count.

Question 22

Joint Return Test

Answer 22

To meet this test, the child cannot file a joint return for the year, unless they file a joint return only to claim a refund of income tax withheld or estimated taxes paid.