Final Regs. Clarify “Counting Nights” Rule for Dependents

When a child of divorced or separated parents lives with both of them during the year, the right to claim the dependency exemption may be released by the “custodial parent” (Sec. 152(e)). The custodial parent is defined as the parent with whom the child resides for the longest period of time during the year (Sec. 152(c)(4)(B)). Proposed regulations defined “custodial parent” as the parent with whom the child resides for the greater number of nights during the year (REG-149856-03).

Practitioners have asked the Service to clarify the term “night” when determining the child’s residence. For example, is it determined by the child’s location at midnight (or some other time), or by where the child sleeps that night? And in which year is the night that spans December 31 and January 1 counted?

The Service has issued final regulations (T.D. 9408) saying that a child is counted as residing with a parent for a night if the child sleeps at that parent’s residence, regardless of whether the parent is at the residence during that night. If the child does not sleep at the parent’s residence but is with the parent while sleeping (such as when the parent and child go on vacation), then the child resides with the parent for that night.

Nights that extend over two tax years are counted with the tax year in which the night started.