rp-08-48.pdf

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Part III

Administrative, Procedural, and Miscellaneous

26 CFR 601.105: Examination of returns and claims for refund, credit, or
abatement; determination of correct tax liability.
(Also Part I, §§ 105, 106, 132, 152. 213, 220, 223; 1.106-1, 1.152-4.)

Rev. Proc. 2008-48

SECTION 1. PURPOSE
This revenue procedure describes the circumstances under which the Internal
Revenue Service will treat a child of parents who are divorced, separated, or
living apart as the dependent of both parents for purposes of §§ 105(b),
106(a),132(h)(2)(B), 213(d)(5), 220(d)(2) and 223(d)(2) of the Internal Revenue
Code when the custodial parent has not released the claim to the exemption for
the child under § 152(e)(2).
SECTION 2. BACKGROUND
.01 Section 105(b) provides an exclusion from gross income to employees for
certain employer-provided medical expense reimbursements, including expenses
incurred by the employee for the medical care (as defined in § 213(d)) of the
employee, the employee’s spouse, or the employee’s dependent (as defined

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under § 152 determined without regard to subsections (b)(1), (b)(2) and
(d)(1)(B)).
.02 Section 106(a) provides that the gross income of an employee does not
include employer-provided coverage under an accident or health plan. Section
1.106-1 of the Income Tax Regulations provides that the exclusion from gross
income extends to contributions that the employer makes to an accident or health
plan on behalf of the employee and the employee’s spouse or dependents, as
defined in § 152. Notice 2004-79, 2004-2 C.B. 898, states that the Service
intends to revise § 1.106-1 to provide that the term “dependent” for purposes of §
106 has the same meaning as in § 105(b), and that taxpayers may rely on the
notice pending the publication of the regulations.
.03 Section 132(a)(1) and (2) provides an exclusion from gross income for
certain fringe benefits that qualify as no-additional-cost services or qualified
employee discounts. Section 132(h)(2)(A) provides that use of the fringe benefit
by the employee’s spouse or dependent is treated as use by the employee. For
this purpose, dependent child means any child (as defined in § 152(f)(l)) of the
employee (i) who is a dependent of the employee, or (ii) both of whose parents
are deceased and who has not attained age 25.
.04 Section 213(a) allows a deduction for medical expenses of the taxpayer,
the taxpayer’s spouse, or the taxpayer’s dependent (as defined under § 152
determined without regard to subsections (b)(1), (b)(2) and (d)(1)(B)).
.05 Sections 220(f)(1) and 223(f)(1) allow an exclusion from gross income for
distributions from Archer Medical Savings Accounts (MSAs) and Health Savings

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Accounts (HSAs), respectively, if the distributions are used to pay qualified
medical expenses (as defined in § 213(d)) of the account beneficiary, the
account beneficiary’s spouse, or the account beneficiary’s dependent (as
defined under § 152 determined without regard to subsections (b)(1), (b)(2) and
(d)(1)(B)).
.06 For purposes of §§ 105(b), 132(a)(1) and (2), and 213(a), any child to
whom § 152(e) applies is treated as a dependent of both parents. Sections
220(d)(2) and 223(d)(2) do not include a similar rule. However, §§ 220(d)(2)(A)
and 223(d)(2)(A) define medical care by reference to § 213(d), and under §
213(d)(5), a child to whom § 152(e) applies is treated as the dependent of both
parents.
.07 Under prior § 152(e), children of divorced or separated parents were
treated as dependents of both parents under §§ 105(b), 132(h)(2)(B), and
213(d)(5) whether or not a parent released the claim to the exemption. The
Working Families Tax Relief Act of 2004, Pub. L. 108-311, 118 Stat. 1166, and
the Gulf Opportunity Zone Act of 2005, Pub. L. 109-135, 119 Stat. 2577,
amended § 152(e) for taxable years beginning after December 31, 2004. Section
152(e) now provides that, in the absence of a qualified pre-1985 instrument (see
§ 152(e)(3)), a child may be treated as the dependent of the noncustodial parent
only if the custodial parent releases the claim to the exemption. Section
152(e)(2). If the custodial parent does not release the claim, the right to the
exemption is determined under the general rules of § 152(c) or (d).
Consequently, the preamble to § 1.152-4(f), 73 FR 37797 (July 2, 2008), explains

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that, if a custodial parent does not release the claim to the exemption, only the
taxpayer who is entitled to claim the child as a dependent under § 152(c) or (d)
may treat the child as a dependent for purposes of §§ 105(b), 132(h)(2)(B), and
213(d)(5). This guidance provides a limited exception to that conclusion.
SECTION 3. SCOPE
This revenue procedure applies to taxpayers who:
.01 Are divorced, legally separated under a decree of divorce or separate
maintenance, legally separated under a written separation agreement, or live
apart at all times for the last 6 months of the calendar year; and
.02 Are the parents of a child who:
(1) Receives over one-half of the child’s support during the calendar
year from the child’s parents;
(2) Is in the custody of one or both parents for more than one-half of the
calendar year; and
(3) Qualifies under § 152(c) or 152(d) as a qualifying child or qualifying
relative of one of the child’s parents.
SECTION 4. APPLICATION
The Service will treat a child described in the scope section of this revenue
procedure of taxpayers within the scope of this revenue procedure as the
dependent of both parents under §§ 105(b), 106(a), 132(h)(2)(B), 213(d)(5),
220(d)(2), and 223(d)(2), whether or not the custodial parent releases the claim
to the exemption under § 152(e)(2).
SECTION 5. EFFECTIVE DATE

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This revenue procedure is effective August 18, 2008. However, taxpayers
may apply this revenue procedure in any taxable year beginning after December
31, 2004, for which the period of limitation on credit or refund under § 6511 has
not expired as of August 18, 2008.
SECTION 6. ADDITIONAL INFORMATION
The principal author of this revenue procedure is Mireille Khoury of the Office
of Division Counsel/Associate Chief Counsel (Tax Exempt and Government
Entities). However, other individuals participated in its development. For further
information regarding this revenue procedure as it relates to §§ 105, 106, 220
and 223, contact Mireille Khoury at (202) 622-6080 (not a toll free call). For
further information regarding this revenue procedure as it relates to § 132,
contact Neil Shepherd at (202) 622-6040 (not a toll-free call). For further
information regarding this revenue procedure as it relates to §§ 152 and 213,
contact Victoria Driscoll at (202) 622-4920 (not a toll-free call).