Comments on: Ask the taxgirl: Failed Adoption Expenses http://www.taxgirl.com/ask-the-taxgirl-failed-adoption-expenses/ Paying taxes is painful... but reading about them shouldn't be. Sun, 12 Feb 2012 17:55:29 +0000 hourly 1 http://wordpress.org/?v=3.1.3 By: Dave http://www.taxgirl.com/ask-the-taxgirl-failed-adoption-expenses/comment-page-1/#comment-14871 Dave Tue, 02 Mar 2010 04:17:08 +0000 http://www.taxgirl.com/?p=2564#comment-14871 here's another twist from our situation. We are in the process of an open adoption through Catholic Social Services. We haven't been selected by a Birth Mother at this point, but have had to pay for various case management fees and a home study in order to get into the 'waiting pool'. As of now, we have paid about $2500 in 2009 towards this process, but there is no specific child that we have 'failed' to adopt - so there is no SSN or TIN to use for the credit form. Is there a way to use the credit, or will we have to wait until an adoption is finalized and then go back and do revised tax forms for this year. Thanks for advice... Dave here’s another twist from our situation.

We are in the process of an open adoption through Catholic Social Services. We haven’t been selected by a Birth Mother at this point, but have had to pay for various case management fees and a home study in order to get into the ‘waiting pool’.

As of now, we have paid about $2500 in 2009 towards this process, but there is no specific child that we have ‘failed’ to adopt – so there is no SSN or TIN to use for the credit form. Is there a way to use the credit, or will we have to wait until an adoption is finalized and then go back and do revised tax forms for this year.

Thanks for advice…

Dave

]]> By: JJ Iagulli http://www.taxgirl.com/ask-the-taxgirl-failed-adoption-expenses/comment-page-1/#comment-9193 JJ Iagulli Sun, 01 Mar 2009 20:41:32 +0000 http://www.taxgirl.com/?p=2564#comment-9193 Just to clarify....I cannot claim expenses on a failed, international adoption...even if the agency was within the U.S.? Just to clarify….I cannot claim expenses on a failed, international adoption…even if the agency was within the U.S.?

]]> By: Kelly http://www.taxgirl.com/ask-the-taxgirl-failed-adoption-expenses/comment-page-1/#comment-8850 Kelly Wed, 11 Feb 2009 19:03:38 +0000 http://www.taxgirl.com/?p=2564#comment-8850 Thanks for the clarification, I tweaked my reply. I've never seen an adoption credit claimed when not followed by a final adoption in the next year, so good to know. The instructions are not terribly well written, I'll agree. It's fun to read some of the info out there - my favorite was the long explanation about why buying a baby on the black market is not a qualified expense. Um, yeah! Thanks for the clarification, I tweaked my reply. I’ve never seen an adoption credit claimed when not followed by a final adoption in the next year, so good to know. The instructions are not terribly well written, I’ll agree.

It’s fun to read some of the info out there – my favorite was the long explanation about why buying a baby on the black market is not a qualified expense. Um, yeah!

]]> By: Vinny http://www.taxgirl.com/ask-the-taxgirl-failed-adoption-expenses/comment-page-1/#comment-8849 Vinny Wed, 11 Feb 2009 18:41:21 +0000 http://www.taxgirl.com/?p=2564#comment-8849 Three things to clarify your answer a bit: 1. If you have a failed domestic adoption, you can claim the credit for the expenses in the following year. Section 23(a)(2)(A) only says that if you incur qualified expenses in a year before the adoption becomes final, you can take the credit for those expenses in the following year. There's no requirement that the adoption ever be finalized. 2. You can never claim an adoption credit for expenses related to a failed foreign adoption. Section 23(e)(1) allows a credit for expenses related to the adoption of a foreign child only if the adoption becomes final, and there's a Revenue Procedure (2005-31) that specifically defines when a foreign adoption is considered to be "final". 3. The IRS, in Form 8839 and its instructions, interprets the statute to say that the credit limitation is per successful attempt. That is, if in 2008 you incur $3,000 in an unsuccessful attempt to adopt a domestic child, and then in 2009 you incur $15,000 in a successful attempt to adopt a different child, the IRS says you're limited to $12,150. I don't see that in the statute, nor do several attorneys I know who lobbied for the adoption credit. The statute just says the limit is per child. If you're in this position, you definitely need to discuss it with your tax advisor. Can you tell I've been through the adoption process? This is a bit of a pet issue for me. Three things to clarify your answer a bit:

1. If you have a failed domestic adoption, you can claim the credit for the expenses in the following year. Section 23(a)(2)(A) only says that if you incur qualified expenses in a year before the adoption becomes final, you can take the credit for those expenses in the following year. There’s no requirement that the adoption ever be finalized.

2. You can never claim an adoption credit for expenses related to a failed foreign adoption. Section 23(e)(1) allows a credit for expenses related to the adoption of a foreign child only if the adoption becomes final, and there’s a Revenue Procedure (2005-31) that specifically defines when a foreign adoption is considered to be “final”.

3. The IRS, in Form 8839 and its instructions, interprets the statute to say that the credit limitation is per successful attempt. That is, if in 2008 you incur $3,000 in an unsuccessful attempt to adopt a domestic child, and then in 2009 you incur $15,000 in a successful attempt to adopt a different child, the IRS says you’re limited to $12,150. I don’t see that in the statute, nor do several attorneys I know who lobbied for the adoption credit. The statute just says the limit is per child. If you’re in this position, you definitely need to discuss it with your tax advisor.

Can you tell I’ve been through the adoption process? This is a bit of a pet issue for me.

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