INTRAOFFICE MEMORANDUM

TO:

Don Frost Tax Partner

FROM:

Kay Mrrt Assistant Tax Specialist

DATE:

September 27, 2011

SUBJECT:

Research Project Research Case Number zz

A. FACTS:
Albert Hall is the five-year-old godson of Mr. and Mrs. Bruce. Alberts parents died in an
accident on December 18 of last year. Albert was seriously injured in the accident and
remained hospitalized until August of this year. After his discharge from the hospital,
Albert moved into the Bruce's home. The Bruce's have provided 100 percent of Alberts
financial support since the accident and intend to raise him as their own child.
B. QUERIES:
The question at hand is can the Bruce's claim Albert as a dependent on this years tax
return? Is Albert a "qualifying child?" Could the Bruce's claim Albert as a qualifying
relative? Are additional facts needed to determine dependent status?
C. CONCLUSIONS:
Based on the arguments and authorities outlined below, the Bruce's cannot claim Albert
as a dependent if their home did not become Alberts principal place of abode until
August of this year. Section 152 of the Internal Revenue Code ("Code") sets forth several
tests to determine whether or not a person can be claimed as a qualifying child or a
qualifying relative. A qualifying child must have shared the same principal place of abode
with the taxpayer for more than one-half of the taxable year, while a qualifying relative
must have lived with the taxpayer for the taxable year. Albert fails the abode test under
either scenario if his principal place of abode was somewhere other than the Bruce's
home from January through July of this year.
It is worth noting, however, that the Bruce family may be able to claim Albert this year if
they can prove his principal place of abode was their home prior to when he physically
moved in with them in August. The Code allows for temporary absences from the home
due to illness. Rev. Rul. 66-28, 1966-1 CB 31 and the cases of Walter J. Hein and
Rodney C. Welsh discuss how temporary absences may be granted for extended periods

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of time due to special circumstances and how a principal place of abode can be changed
even before a person physically takes up residence in the home. While we cannot
definitively say the Bruce family can claim Albert as a dependent due to special
circumstances, information regarding the decisions of these two long-standing cases is
provided below. If the Bruce's wish to claim the child, we need to obtain additional
information regarding their role in Alberts life since the accident so that we may
effectively advise them.
D. ARGUMENTS AND AUTHORITIES:
This case centers around whether or not the Bruce family can claim Albert as a
dependent. Section 152(a) of the Internal Revenue Code defines a dependent as a
qualifying child or a qualifying relative. The IRC definitions for each are provided below.
152(c) QUALIFYING CHILD. -- For purposes of this section --IN GENERAL. --The
term "qualifying child" means, with respect to any taxpayer for any taxable year, an
individual -- who bears a relationship to the taxpayer described in paragraph (2), who
has the same principal place of abode as the taxpayer for more than one-half of such
taxable year, who meets the age requirements of paragraph (3), who has not provided
over one-half of such individual's own support for the calendar year in which the
taxable year of the taxpayer begins, and who has not filed a joint return (other than
only for a claim of refund) with the individual's spouse under section 6013 for the
taxable year beginning in the calendar year in which the taxable year of the taxpayer
begins.
Several of the tests for a qualifying relative are similar to those of a qualifying child.
152(d) QUALIFYING RELATIVE. -- For purposes of this section -- IN GENERAL. -The term "qualifying relative" means, with respect to any taxpayer for any taxable year,
an individual -- who bears a relationship to the taxpayer described in paragraph (2),
whose gross income for the calendar year in which such taxable year begins is less
than the exemption amount (as defined in section 151(d)), with respect to whom the
taxpayer provides over one-half of the individual's support for the calendar year in
which such taxable year begins, and who is not a qualifying child of such taxpayer or of
any other taxpayer for any taxable year beginning in the calendar year in which such
taxable year begins. An individual (other than an individual who at any time during the
taxable year was the spouse, determined without regard to section 7703, of the
taxpayer) who, for the taxable year of the taxpayer, has the same principal place of
abode as the taxpayer and is a member of the taxpayer's household.
The given facts state that Albert did not move in with the Bruce family until August of this
year. If no other information can be obtained, one would have to conclude that the
Bruce's home became Alberts principal place of abode only after he was released from
the hospital in August. Since the Bruce residence was Alberts principal place of abode
for less than half a year, Albert is neither a qualifying child nor a qualifying relative and
cannot be claimed as a dependent on this years tax return. No additional testing is
needed. The fact that the Bruce family provided 100% of the childs financial support is
irrelevant if the abode test is not met because all of the tests must be met in order to
claim an individual as a qualifying child or relative.
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If additional details can be obtained, we may find that the Bruce's situation has been
overly simplified in the brief synopsis provided to our firm. If the Bruce family wish to
claim Albert as a dependent, our firm needs further information in order to fully
understand the Bruce's role in Alberts life since the accident. While the role of
godparent does not constitute a legal relationship, the fact that they intend to raise him
as their own child and that they have been the sole providers of financial support since
the accident could be evidence that they became adoptive parents after the accident in
December. If this is the case, Albert meets the uniform definition of a child.
As explained in CCH-EXP, FILEIND-6,168.05 Post-2004 Dependency ExemptionGeneral Rules, A taxpayer's children include the taxpayer's natural children, stepchildren, adopted children and eligible foster children. A taxpayer's adopted child is a
child who has been legally adopted by the taxpayer, or a child who has been lawfully
placed with the taxpayer for legal adoption by the taxpayer. A taxpayer's eligible foster
child is a child who has been placed with the taxpayer by an authorized agency or by a
judgment, decree or other order of any court of competent jurisdiction.
In addition to the relationship test, Albert also passes several of the other tests for a
qualifying child. He has not yet attained age 19; he did not provide more than half of his
own support during the year; and he is not filing a joint return. We are left with the
principal place of abode test outlined in 152(c)(1)(B). Generally, a child must live with
the taxpayer for more than half a year; however, there are exceptions for temporary
absences. As IRS Publication 501 Exemptions, Standard Deduction, and Filing
Information (2008) advises taxpayers, Your child is considered to have lived with you
during periods of time when one of you, or both, are temporarily absent due to special
circumstances such as illness, education, business, vacation, or military service. In light
of this information, Alberts hospitalization for injuries could be considered a temporary
absence due to illness.
Rev. Rul. 66-28, 1966-1 CB 31, explains how the temporary absence concept can be
traced back to 1.1-2(c)(1) of the regulations under the 1954 Code and 39.12-4(c) of
Regulations 118 of the 1939 Code. History has shown that the key issue in the abode
test is not the length of the temporary absence, but whether there is intent to change the
principal place of abode. In Walter J. Hein v. Commissioner, 28 T.C. 826 (1957)
Acquiescence, C.B. 1958-2, 6, the court ruled that the taxpayers sister could be
considered a dependent even though she spent the entire tax year in a nursing home and
would likely not return to the taxpayers home. Her stay at the nursing home was deemed
a temporary absence due to special circumstances. In reviewing the Hein case, Rev. Rul.
66-28 says, There must, of course, be an absence of an intent on the part of the
taxpayer and the dependent to change the dependent's principal place of abode.
A second case that has been around for nearly 50 years rewords the change of abode
concept so that it relates even more directly to the Bruce's situation. The decision in
Rodney C. Welsh, Plaintiff v. United States of America, Defendant, [60-1 USTC 9193],
U. S. District Court, East. Dist. Wis., shows that a dependents principal place of abode
can change without the dependent physically occupying the new residence. In the court
case, the taxpayer planned to have his mother live with him after hip surgery, but his

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mother died before recovering from the surgery. The taxpayer had made preparations for
his mothers change of residence by moving her belongings into his home. The court
ruled that the mothers principal place of abode actually changed when all parties
involved agreed that the mother should move in with the taxpayer upon recovery from
surgery. Following this same logic, Alberts principal place of abode could have changed
from his parents to the Bruce residence if a legal arrangement such as adoption was
made while Albert was still in the hospital. In such a case, the Bruce family could claim
Albert as a dependent on this years tax return.

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