That's amazing! (And *extremely* gratifying. Made my day, actually.)
It would be a *crime* for me not to ask you a question now. I would bring myself up on charges and throw away the key. So I've been thinking for a day, and here is my question. If it's not in your field, I accept that, but I'm asking anyway:
In 26 USC 152, "qualifying children" and SOME "qualifying relatives" (namely 152(d)(2)(H) relatives) must pass a residency test to count as dependents. For children, it's half the taxable year. For relatives, it's the whole taxable year. Based on its publications, the IRS seems to truly believe that, if a potential dependent was not alive for some portion of the taxable year, that period just doesn't count.
On the one hand, this makes a lot of common sense. On the other hand, I couldn't find any basis for it in law, regulation, or precedent. Does it have one?
(I strongly suspect there *is* a basis for it. "Don't count the months that you were dead" feels like some really fundamental principle of tax law I've never heard of. I just couldn't find it. If I knew where it came from, that would help a big remaining piece of the puzzle fall into place for me.)
Nothing that I'm aware of, but as you suspect, it's not my area of expertise. My gut reaction is that if I researched it, I would not be able to nail down a direct statement of any principle, unless someone had published a note on it in some tax journal.
BTW, when you are researching these kind of things, you should be reading not only the statute & the regulations, but the examples under the regulations. An attorney I was supervising once had a case in which opposing counsel constructed a decent argument involving partnership law, but then had the rug pulled out from under him when we pointed out a contrary example under a related regulation that was directly on point against him.
When I say you have openers, I don't mean that you have a great chance of succeeding. But your argument is coherent & would require a coherent response, & that should protect you from any assertion by the government concerning fines or penalties. You don't get penalized for arguing against the government's position - you get penalized for persisting in making a bad argument to the point of having a judge waste his time listening to you. (But a caveat - if you are asserting a position on your tax return that you know is contrary to the official interpretation, be sure to point it out on the return when you file it.)
"When I say you have openers, I don't mean that you have a great chance of succeeding."
Agreed. But "not getting penalized" would be a very nice consolation prize. (And grateful for the caveat.)
"BTW, when you are researching these kind of things, you should be reading not only the statute & the regulations, but the examples under the regulations."
Can you give me an example of this? When I'm reading the Code of Federal Regulations itself, directly, I don't see any examples, just rules. I assume there are IRS publications somewhere that have examples, but am not sure where to find them. An example would suffice to get me on the right track.
It's literally been decades since I've had to do tax research myself - when I did have to, I used dead tree products, like the CCH (Commerce Clearing House) reporting services, which could be found in any decent law library, and could be used for legal citations in briefs. So my research skills are practically non-existent in the digital universe - and would require me to pay for access.
Not all regs contain examples, but these two regs do:
§ 1.152-2 Rules relating to general definition of dependent.
(a) (1) Except as provided in subparagraph (2) of this paragraph, to qualify as a dependent an individual must be a citizen or resident of the United States or be a resident of the Canal Zone, the Republic of Panama, Canada, or Mexico, or, for taxable years beginning after December 31, 1971, a national of the United States, at some time during the calendar year in which the taxable year of the taxpayer begins. A resident of the Republic of the Philippines who was born to or legally adopted by the taxpayer in the Philippine Islands before January 1, 1956, at a time when the taxpayer was a member of the Armed Forces of the United States, may also be claimed as a dependent if such resident otherwise qualifies as a dependent. For definition of “Armed Forces of the United States,” see section 7701(a)(15).
Your biggest problem will probably be that tax deductions are "a matter of legislative grace." https://www.yalejreg.com/nc/king-v-burwell-where-did-the-legislative-grace-canon-go-by-andy-grewal/ That is, you get them because the Congress has specified them, & the government's argument will be that since a deduction for an unborn child is not specified, no deduction should be allowed. In order to advance your argument, you are going to have to convince a court that an unborn child is a "resident," (if not a "citizen") of the US. But "A resident of the Republic of the Philippines who was born to..." implies that a child is not a resident until he is born.
I’m a retired IRS lawyer. Just wanted to tell you that I enjoyed reading this article. And in my view, you’ve got openers.
That's amazing! (And *extremely* gratifying. Made my day, actually.)
It would be a *crime* for me not to ask you a question now. I would bring myself up on charges and throw away the key. So I've been thinking for a day, and here is my question. If it's not in your field, I accept that, but I'm asking anyway:
In 26 USC 152, "qualifying children" and SOME "qualifying relatives" (namely 152(d)(2)(H) relatives) must pass a residency test to count as dependents. For children, it's half the taxable year. For relatives, it's the whole taxable year. Based on its publications, the IRS seems to truly believe that, if a potential dependent was not alive for some portion of the taxable year, that period just doesn't count.
On the one hand, this makes a lot of common sense. On the other hand, I couldn't find any basis for it in law, regulation, or precedent. Does it have one?
(I strongly suspect there *is* a basis for it. "Don't count the months that you were dead" feels like some really fundamental principle of tax law I've never heard of. I just couldn't find it. If I knew where it came from, that would help a big remaining piece of the puzzle fall into place for me.)
Thanks for reading and commenting!
Nothing that I'm aware of, but as you suspect, it's not my area of expertise. My gut reaction is that if I researched it, I would not be able to nail down a direct statement of any principle, unless someone had published a note on it in some tax journal.
BTW, when you are researching these kind of things, you should be reading not only the statute & the regulations, but the examples under the regulations. An attorney I was supervising once had a case in which opposing counsel constructed a decent argument involving partnership law, but then had the rug pulled out from under him when we pointed out a contrary example under a related regulation that was directly on point against him.
When I say you have openers, I don't mean that you have a great chance of succeeding. But your argument is coherent & would require a coherent response, & that should protect you from any assertion by the government concerning fines or penalties. You don't get penalized for arguing against the government's position - you get penalized for persisting in making a bad argument to the point of having a judge waste his time listening to you. (But a caveat - if you are asserting a position on your tax return that you know is contrary to the official interpretation, be sure to point it out on the return when you file it.)
Forgot to answer this!
"When I say you have openers, I don't mean that you have a great chance of succeeding."
Agreed. But "not getting penalized" would be a very nice consolation prize. (And grateful for the caveat.)
"BTW, when you are researching these kind of things, you should be reading not only the statute & the regulations, but the examples under the regulations."
Can you give me an example of this? When I'm reading the Code of Federal Regulations itself, directly, I don't see any examples, just rules. I assume there are IRS publications somewhere that have examples, but am not sure where to find them. An example would suffice to get me on the right track.
Obliged!
It's literally been decades since I've had to do tax research myself - when I did have to, I used dead tree products, like the CCH (Commerce Clearing House) reporting services, which could be found in any decent law library, and could be used for legal citations in briefs. So my research skills are practically non-existent in the digital universe - and would require me to pay for access.
Not all regs contain examples, but these two regs do:
https://www.law.cornell.edu/cfr/text/26/1.152-2 and https://www.taxnotes.com/research/federal/cfr26/1.21-4?h=151
Also note:
§ 1.152-2 Rules relating to general definition of dependent.
(a) (1) Except as provided in subparagraph (2) of this paragraph, to qualify as a dependent an individual must be a citizen or resident of the United States or be a resident of the Canal Zone, the Republic of Panama, Canada, or Mexico, or, for taxable years beginning after December 31, 1971, a national of the United States, at some time during the calendar year in which the taxable year of the taxpayer begins. A resident of the Republic of the Philippines who was born to or legally adopted by the taxpayer in the Philippine Islands before January 1, 1956, at a time when the taxpayer was a member of the Armed Forces of the United States, may also be claimed as a dependent if such resident otherwise qualifies as a dependent. For definition of “Armed Forces of the United States,” see section 7701(a)(15).
Your biggest problem will probably be that tax deductions are "a matter of legislative grace." https://www.yalejreg.com/nc/king-v-burwell-where-did-the-legislative-grace-canon-go-by-andy-grewal/ That is, you get them because the Congress has specified them, & the government's argument will be that since a deduction for an unborn child is not specified, no deduction should be allowed. In order to advance your argument, you are going to have to convince a court that an unborn child is a "resident," (if not a "citizen") of the US. But "A resident of the Republic of the Philippines who was born to..." implies that a child is not a resident until he is born.
You've been invaluable. Thanks very much.