Dependent in the Armed Forces.
Generally, an exemption cannot be claimed for a person who is in the Armed Forces or is at one of the Armed Forces academies for the entire year because the support test will not have been met. However, if your dependent receives only partial support from the Armed Forces, you can still claim the exemption if you provided more than half his or her support and the other tests are met.
Example. Leslie James is 18 and single. She graduated from high school in June 1998 and entered the U.S. Air Force in September 1998. Leslie provided $4,400 (her wages of $3,400 and $1,000 for other items provided by the Air Force) for her support that year. Her parents provided $4,100. Her parents cannot claim a dependency exemption for her for 1998 because they did not provide more than half her support.
Federal Tax Coordinator 2d
Generally, an exemption can't be claimed for a person who is in the Armed Forces or is at one of the Armed Forces academies for the entire year because the support test won't have been met.
7. IRS Pub No. 3, (1998), pp. 8.
To claim the serviceperson as a dependent, taxpayer must furnish over half the support (or must qualify under the special rule for divorced or separated parents, see ¶ A-3800). In applying the support test, board, lodging, clothing, medical and dental care, education and similar items supplied by the armed services must be taken into account.
7.1 Rev. Rul. 70-87, 1970-1 CB 29.
Illustration : Daughter is 18 and single. She graduated from high school in June and entered the U.S. Air Force in September. She provided $4,400 (her wages of $3,400 and $1,000 for other items provided by the Air Force) for her support that year. Her parents provided $4,100. Her parents can't claim a dependency exemption for her for the year because they didn't provide more than half her support.
7.2. IRS Pub No. 3, (1998), pp. 8.
Dependency deduction wasn't allowed where the Tax Court estimated the support amount contributed by the military service, and the taxpayer couldn't show greater contributions.
8. Darmer, Bennet, (1953) 20 TC 822; Wright, Gerald, (1960) TC Memo 1960-271, PH TCM ¶60271, 19 CCH TCM 1516.
Pay and allowances received by students at West Point, Annapolis, the Coast Guard Academy and the Air Force Academy aren't scholarship awards to be excluded in determining whether the student is a dependent.
9. Rev. Rul. 55-347, 1955-1 CB 21.