A situation that frequently arises, particularly with elderly persons, is that a number of people are contributing to an individual's support but no one is paying more than one-half of the support.

The IRS has devised a special rule to cover situations where two or more individuals would have been eligible to claim the dependency exemption if not for the support test, and together these individuals provide more than half of the support.

They can agree among themselves that one of them who provides more than 10 percent of the support will get the exemption. Each of the others must sign an IRS Form 2120, Multiple Support Declaration, or another written statement agreeing not to claim the exemption for that year. These forms or statements must be filed along with the income tax return of the person who's claiming the exemption.

In making the decision as to who will get the most tax savings from the exemption, it's important to consider the marginal tax rates of the eligible contributors as well as the effect of the phaseout of personal exemptions discussed below.

Example Amy, Betty, Carl, and Donald together provide 80% of the total support for their mother, Evelyn in the following amounts: Amy 35% Betty 20% Carl 20% Donald 5% TOTAL 80% Evelyn receives nontaxable Social Security benefits to cover the remaining 20% of her expenses. Because Amy, Betty, and Carl all provide more than 10% of Evelyn's support, they may choose which one of them should get the exemption, provided that the other two sign statements to that effect. Donald does not need to sign a statement since his contributions were not greater than 10%.