Question

Tami and her daughter, Jade (5), lived with Tami's mother, Yasmin, for the entire year. Yasmin covered the entire cost of keeping up the home. Tami's adjusted gross income (AGI) was $12,000, and Yasmin's AGI was $30,000. Jade meets the requirements of a qualifying child dependent for both Tami and Yasmin. Yasmin wants to claim her granddaughter, Jade, on her tax return. As Yasmin's tax preparer, what information should you share with Yasmin?

A. Yasmin can claim Jade as a qualifying child if she files before Tami, as Jade meets the requirements.

B. Tami will receive the dependency benefits if both Tami and Yasmin claim Jade, as the first tiebreaker rule favors the parent.

C. Only Yasmin is eligible to claim Jade, given her higher adjusted gross income.

D. Yasmin and Tami may come to an agreement to each claim Jade, as she meets the qualifying child requirements for both.

Answer 1

Yasmin cannot claim Jade if Tami, the child's parent, wishes to claim her. The 'tie-breaker rule' in tax law gives priority to the parent. An arrangement between Yasmin and Tami can be made if Tami relinquishes her right with IRS Form 8332. The correct option is B. Tami will receive the dependency benefits if both Tami and Yasmin claim Jade, as the first tiebreaker rule favors the parent.

Step-by-step explanation:

Regarding the question of whether Yasmin can claim her granddaughter, Jade, as a dependent, the tax rules state that the parent has the primary right to claim the child as a dependent if the child is a qualifying child for that parent.

In this scenario, since both Tami (Jade's mother) and Yasmin (Jade's grandmother) could claim Jade, Tami would be given the preference because she is the parent.

This is known as the 'tie-breaker rule' in tax law which clearly favors the parent over other relatives when both can claim the child as a dependent. Yasmin is incorrect if she believes that having a higher adjusted gross income (AGI) gives her the sole right to claim the dependent.

Option A is incorrect, as filing first does not grant Yasmin the right to claim Jade. Option C is also incorrect, as the higher AGI does not determine eligibility in this situation.

Option D mentions an arrangement between Yasmin and Tami, but it fails to convey the tie-breaker rules correctly. The correct information, which aligns with Option B, is the one following tax regulations where Tami, as the parent, has the right to claim Jade, unless Tami decides to release her claim to the dependency exemption by completing IRS Form 8332. The correct option is B. Tami will receive the dependency benefits if both Tami and Yasmin claim Jade, as the first tiebreaker rule favors the parent.