Fudenberg v. MolstadFudenberg v. Molstad
OPINION
In November 1983, appellant Arthur Fu-denberg brought an action to establish paternity and to gain custody of the parties’ child. Respondent Elisabeth Molstad de
The only remaining issues, allotment of the federal income tax dependency exemption and respondent’s request for attorney fees, were heard by a family court referee. The referee awarded the exemption to appellant and granted only $350 of respondent’s requested attorney fees ($1350).
Respondent then moved for review under
FACTS
The parties’ child was born in October 1978. He has always resided with respondent, and was five years old when appellant initiated this action. Appellant provided some child support and maintained visitation with the child. Appellant is a court reporter earning approximately $31,600 per year. Respondent is a social worker and earned $21,600 at the time of the referee’s order. She currently earns $26,000 annually.
ISSUES
1. May Minnesota courts allot the federal income tax dependency exemption to the noncustodial parent?
2. Was the trial court’s award of $1,350 in attorney fees an abuse of discretion?
ANALYSIS
1. Before January 1, 1985, the federal internal revenue code clearly authorized state courts to allocate the dependency exemption to the noncustodial parent.
The two exceptions were commonly referred to as “the $600 rule” and “the $1200 rule.” Under the $600 rule, the noncustodial parent could claim the exemption if he or she provided at least $600 support during the year and the decree (or written agreement between the parties) provided that the noncustodial parent was entitled to the deduction.
State courts, including this court, have interpreted the pre-1985 version of
In
Greeler,
this court held that the trial court had jurisdiction to modify a dissolution stipulation concerning the dependency exemption. The court noted that neither
The Indiana court in
Morphew
noted that the federal government’s right to collect taxes is independent of state law.
In 1984,
The reasons given for the change are as follows:
The present rules governing the allocations of the dependency exemption are often subjective and present difficult problems of proof and substantiation. The Internal Revenue Service becomes involved in many disputes between parents who both claim the dependency exemption based on providing support over the applicable thresholds. The cost to the parties and the Government to resolve these disputes is relatively high and the Government generally has little tax revenue at stake in the outcome. The committee wishes to provide more certainty by allowing the custodial spouse the exemption unless that spouse waives his or her right to claim the exemption. Thus, dependency disputes between parents will be resolved without the involvement of the Internal Revenue Service.
H.R. No. 432, Part II, 98th Cong., 2d Sess., reprinted in 1984 U.S.Code Cong. & Ad. News 697, 1140.
It appears from the legislative history that Congress was most concerned with alleviating the burden on the IRS caused by factfinding determinations. Under the old law, the question of how much support had been provided by each parent was a fact question that had to be resolved by the IRS when the parents could not agree and each sought to claim the exemption. Under the new law, the IRS no longer needs to be concerned with these fact questions. The only questions are which parent is the custodial parent, and whether he or she has waived the right to claim the exemption.
State court allocation of the exemption does not interfere with Congressional intent. It does not involve the IRS in fact-finding determinations. State court involvement has no impact on the IRS. Thus, allocation of the exemption is permissible.
Cf Valento v. Valento,
We note that the court’s order should make the custodial parent’s execution of the waiver contingent upon receipt of support payments. Whether support has been paid will be readily ascertainable because the waiver need not be signed until the noncustodial parent’s federal return for the completed tax year is filed.
We also note that the effect of awarding the exemption to the noncustodial parent will be to increase the income to which the support guidelines apply.
See
2. The referee awarded only $350 of respondent’s requested $1350 attorney fees. The referee seems to have awarded a lower amount because appellant voluntarily made child support payments before initiation of this action. The reviewing court noted that appellant was “merely doing what he ought to have done” and thought the payments were irrelevant to the question of attorney fees. The court also noted that the parties had been extremely litigious and that appellant was primarily responsible. As a result, the court increased the award to $1350.
Review of a referee’s order pursuant to
The referee made specific findings with respect to the parties’ incomes. The reviewing court did not disturb these findings on review. We assume that in reviewing the referee’s findings the trial court considered the parties’ financial resources. The record is clear that appellant’s income is greater than respondent’s income. Furthermore, the trial court specifically found that appellant was primarily responsible for the parties’ litigiousness.
See Kirby v. Kirby,
DECISION
The referee was not precluded by federal law from allocating the federal income tax dependency exemption to the noncustodial parent. We reverse the trial court on this issue and remand for consideration of whether the exemption should be allotted to appellant on condition he pay all support as ordered. The trial court’s award of attorney fees was not an abuse of discretion.
Affirmed in part, reversed in part and remanded.