In a non-precedential decision in Leonard v. Commissioner (T.C. Summary Opinion 2008-141) (full opinion here), the Tax Court permitted a pro se taxpayer to take dependency exemption deductions for the grandchildren of her “friend,” an adult woman with whom the taxpayer had been living for 11 years. The taxpayer had furnished more than one-half of the cost of maintaining a joint household for herself, her “friend” and the friend’s two grandchildren.
Ordinarily, the IRS would not permit a taxpayer to take a dependency exemption for an unrelated person’s grandchildren. However, because the taxpayer’s “friend” was not required to file an income tax return, and did not file a return (her income was below the minimum threshold for filing), the Tax Court permitted the deductions by the taxpayer.
The pro se taxpayer herself reported AGI of less than $30,000. She took the case all the way to the Tax Court and won!