The I.R.S. has issued final regulations that clarify a qualified relative's definition within the meaning of various provisions of the Code for fiscal years 2018-2025. The final regulations adopt the proposed rules in June 2020, without significant changes.
Background
While Code Sec 151 (a) allows a taxpayer to claim exemption deductions for the taxpayer and his/her spouse and any dependents, the exemption amount through 2025 is zero.
Before being amended by the Tax Cut and Jobs Act, the exemption amount was a base dollar amount adjusted for inflation. Before the TCJA, the value of the exemption for 2018 was estimated at $ 4,150.
Code section. 152 (a) defines a dependent to include a "qualifying relative." To be a qualified relative, a person must have a gross income less than the value of Sec. 151 (d) for the calendar year ("income test") and receives more than half of its support from the taxpayer who claims to be a qualifying relative ("support test")
One provision of the Code that refers to a "qualifying relative" is the Code, Section 24, Child Tax Credit. Code section. 24 (h) (4) (A) grants a credit of $ 500 to certain dependents of a taxpayer, including qualified family members, within the meaning of s. Code 152d), "who is not an eligible child referred to in paragraph (ç)." This credit applies for the 2018-2025 fiscal years.
N. 2018-70. On August 28, 2018, the I.R.S. issued Notice 2018-70, 2018-38 IRB 441. This notice announces the I.R.S.'s intention to reflect changes to Sec. 151 of the TCJA, publishing a draft regulation declaring that the zero exemption amount under section 151 (d) (5) (A) for the 2018-2025 fiscal years will not be taken into account in determining whether a person meets the requirement of section 152 (d) (1) (B) be a qualified parent.
According to Notice 2018-70, the value of the exemption is mentioned in the Code section. 152 (d) (1) (B) will be treated as $ 4,150 (adjusted for inflation) for the years in which s. Code 151 (d) (5) (A), the exemption value is zero. See I.R.S. clarifies the definition of "qualified parent" in light of the changes made to the TCJA (08/29/2018).
Proposed rules. In June 2020, the I.R.S. proposed rules that clarify the definition of "qualified parent." According to communication 2018-70, the bill stipulates that to determine whether a person is a qualified parent, within the meaning of the various provisions of the Code that refer to the section of the Code. 152 In years where the waiver value is zero, security code 151 (d) Waiver amount is the security code adjusted for inflation. 152d) (1) (B) the amount of the exemption published annually in a revenue proceeding. (Prop Reg §1.152-3 (c) (3) (i), Preamble to Prop Reg REG-118997-19) See proposed rules to clarify the relative definition of qualification (09/06/2020).
Final rules
The final rules adopt the rules proposed for 2020, without substantial changes. Also, in response to a comment on the proposed regulation for 2020 regarding a legal reference in the Code section. 24h) (4) for "a qualified child described in paragraph (c)," the final rules state that the legal referral is a referral to Sec. 24 (c), not code 152 (c)) (Reg. §1.24-1)
Applicability date. Reg §1.24-1 and Reg §1.152-2 (b) apply to fiscal years beginning on or after the date of publication in the Federal Register. (Reg §1.24-1 (b); Reg §1.152-2 (b) (2))
Rule §1.152-2 (e) applies to fiscal years ending after August 28, 2018, when the I.R.S. issued notification 2018-70. (Reg. §1.152-2 (e) (2))
Effective Date
These regulations are effective on the date of their publication in the Federal Register.
The amount of the exemption. On June 9, 2020, the Treasury and the Revenue Agency published a public notice regarding draft regulation REG-118997-19. According to Communication 2018-70, the proposed regulations specify whether a person is a qualified parent within the meaning of the various provisions relating to Sec. Dry cod. The value of exemption 151 (d) will be the code sec. Adjusted for inflation. 152d) (1) (B) the amount of the exemption in the annual income procedure, which establishes the correct elements for inflation, which is published in the Federal Revenue Bulletin. Therefore, the exemption amount that will be used for this purpose is $ 4,150 for the 2018 fiscal year (section 3.24 of Rev. Proc. 2017-58, 2017-45 IRB 489, amended and replaced by Rev., 2018 -10 IRB 392); $ 4,200 for the fiscal year 2019 (section 3.25 of Proc. Rev. 2018-57, 2018-49 I.R.B. 827); and $ 4,300 for the fiscal year 2020 (section 3.25 of the revised procedure 2019-44, 2019-47 I.R.B. 1093). (T.D.9913, September 17, 2020).
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