Publication 501 - Exemptions, Standard Deduction, And Filing Information

Fair rental value defined. This is the

Example 3. You pay $5,000 for a car and

persons, each of whom would be able to take

amount you could reasonably expect to receive

the exemption but for the support test, together

from a stranger for the same kind of lodging. It is

17-year-old daughter use the car equally. Be-

provide more than half of the person’s support.

used in place of rent or taxes, interest, deprecia-

cause you own the car and do not give it to your

When this happens, you can agree that any

tion, paint, insurance, utilities, cost of furniture

daughter but merely let her use it, you cannot

one of you who individually provides more than

and appliances, etc. In some cases, fair rental

include the cost of the car in your daughter’s

10% of the person’s support, but only one, can

value may be equal to the rent paid.

total support. However, you can include in your

claim an exemption for that person. Each of the

If you provide the total lodging, the amount of

daughter’s support your out-of-pocket expenses

others must sign a written statement agreeing

support you provide is the fair rental value of the

of operating the car for her benefit.

not to claim the exemption for that year. The

room the person uses, or a share of the fair

statements must be filed with the income tax

Example 4. Your 17-year-old son, using

rental value of the entire dwelling if the person

return of the person who claims the exemption.

personal funds, buys a car for $4,500. You pro-

has use of your entire home. If you do not pro-

Form 2120, Multiple Support Declaration, can

vide all the rest of your son’s support — $4,000.

vide the total lodging, the total fair rental value

be used for this purpose.

Since the car is bought and owned by your son,

must be divided depending on how much of the

the car’s fair market value ($4,500) must be

total lodging you provide. If you provide only a

Example 1. You, your sister, and your two

included in his support. The $4,000 support you

part and the person supplies the rest, the fair

brothers provide the entire support of your

provide is less than half of his total support of

rental value must be divided between both of

mother for the year. You provide 45%, your

$8,500. You cannot claim an exemption for your

you according to the amount each provides.

sister 35%, and your two brothers each provide

son.

10%. Either you or your sister can claim an

Example. Your parents live rent free in a

Medical insurance premiums. Medical insur-

exemption for your mother. The other must sign

house you own. It has a fair rental value of

ance premiums you pay, including premiums for

a Form 2120 or a similar statement agreeing not

$5,400 a year furnished, which includes a fair

supplementary Medicare coverage, are in-

to take an exemption for her. Because neither

rental value of $3,600 for the house and $1,800

cluded in the support you provide.

brother provides more than 10% of the support,

for the furniture. This does not include heat and

neither can take the exemption. Your brothers

utilities. The house is completely furnished with

Medical insurance benefits. Medical in-

do not have to sign a Form 2120 or the written

furniture belonging to your parents. You pay

surance benefits, including basic and supple-

statement.

$600 for their utility bills. Utilities are not usually

mentary Medicare benefits, are not part of

included in rent for houses in the area where

support.

Example 2. You and your brother each pro-

your parents live. Therefore, you consider the

Tuition payments and allowances under the

vide 20% of your mother’s support for the year.

total fair rental value of the lodging to be $6,000

GI Bill. Amounts veterans receive under the

The remaining 60% of her support is provided

($3,600 fair rental value of the unfurnished

GI Bill for tuition payments and allowances while

house, $1,800 allowance for the furnishings pro-

equally by two persons who are not related to

they attend school are included in total support.

vided by your parents, and $600 cost of utilities)

her. She does not live with them. Because more

of which you are considered to provide $4,200

than half of her support is provided by persons

Example. During the year, your son re-

($3,600 + $600).

who cannot claim an exemption for her, no one

ceives $2,200 from the government under the GI

can take the exemption.

Bill. He uses this amount for his education. You

Person living in his or her own home. The

provide the rest of his support — $2,000. Be-

total fair rental value of a person’s home that he

Example 3. Your father lives with you and

cause GI benefits are included in total support,

or she owns is considered support contributed

receives 25% of his support from social security,

your son is not your dependent.

by that person.

40% from you, 24% from his brother, and 11%

Other support items. Other items may be

Living with someone rent free. If you live

from a friend. Either you or your uncle can take

considered as support depending on the facts in

with a person rent free in his or her home, you

the exemption for your father. A Form 2120 or a

each case. For example, if you pay someone to

must reduce the amount you provide for support

similar statement from the one not taking the

provide child care or disabled dependent care,

by the fair rental value of lodging he or she

exemption must be attached to the return of the

you can include these payments as support,

provides you.

one who takes the exemption.

even if you claim a credit for them. For informa-

Property. Property provided as support is

tion on the credit, see Publication 503, Child and

measured by its fair market value. Fair market

Dependent Care Expenses.

Support Test for Child of

value is the price that property would sell for on

Divorced or Separated Parents

the open market. It is the price that would be

agreed upon between a willing buyer and a

Do Not Include

The support test for a child of divorced or sepa-

willing seller, with neither being required to act,

in Total Support

rated parents is based on the special rules ex-

and both having reasonable knowledge of the

plained here and shown in Figure B. However,

relevant facts.

The following items are not included in total

these special rules apply only if all of the follow-

support.

Capital expenses. Capital items, such as

ing are true.

furniture, appliances, and cars, that are bought

1) Federal, state, and local income taxes paid

1) The parents are divorced or legally sepa-

for a person during the year can be included in

by persons from their own income.

rated under a decree of divorce or sepa-

total support under certain circumstances.

2) Social security and Medicare taxes paid by

rate maintenance, or separated under a

The following examples show when a capital

persons from their own income.

written separation agreement, or lived

item is or is not support.

apart at all times during the last 6 months

3) Life insurance premiums.

Example 1. You buy a $200 power lawn

of the calendar year.

4) Funeral expenses.

mower for your 13-year-old child. The child is

2) One or both parents provide more than

given the duty of keeping the lawn trimmed.

5) Scholarships received by your child if your

half of the child’s total support for the cal-

Because a lawn mower is ordinarily an item you

child is a full-time student.

endar year.

buy for personal and family reasons that bene-

6) Survivors’ and Dependents’ Educational

fits all members of the household, you cannot

3) One or both parents have custody of the

Assistance payments used for the support

include the cost of the lawn mower in the support

child for more than half of the calendar

of the child who receives them.

of your child.

year.

“Child” is defined earlier under Gross Income

Example 2. You buy a $150 television set

Test.

as a birthday present for your 12-year-old child.

Multiple Support Agreement

This discussion does not apply if the support

The television set is placed in your child’s bed-

room. You can include the cost of the television

Sometimes no one provides more than half of

of the child is determined under a multiple sup-

set in the support of your child.

the support of a person. Instead, two or more

port agreement, discussed earlier.

Page 14

Publication 501 - Exemptions, Standard Deduction, And Filing Information - 2001 Page 14

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