Rock-Paper-Scissors rules for tax law

Okay--I'm out of hard-and-fast commandments for now, so I'll move on to another analogy: tax law can sometimes be like rock-paper-scissors.

1) When considering dependent status, Qualifying Child (QC) trumps Qualifying Relative (QR). In other words, if the potential dependent is anyone's QC, he can't qualify as a QR for anybody. Do not ever check for QR status without first ruling out the possibility that the potential dependent could be a QC for that taxpayer or for another taxpayer.

2) When considering QC status, relationship and residence trump support. In other words, if the potential dependent is a QC of more than one taxpayer, it does not matter which taxpayer provided more support. The tiebreak rules for QC give priority to relationship and residence. Remember that you don't need to support a QC to claim him! The support test for a QC exemption just requires that the QC does not provide more than 50% of his own support.

3) After ruling out QC status, then--and only then--can you consider the possibility of QR status, in which case support may possibly trump relationship and/or residence. You do need to support a QR to claim him or her, but you may not need to live with him (depending on how closely he is related to you.)

It is complicated! I've read Tax Court cases that make it clear that even IRS auditors have occasionally incorrectly applied the rules. That is why it is important to carefully work through the flowcharts in Tab C of Pub 4012 when determining QC and QR dependents.

For more on that topic, see here.