LOL! Let me know how that works out at your audit! Also, using your logic you would need to include the cost of the room and board as income. As parentalunit2 said, the IRS is all about $$$$$.If you answer the questions on the IRS site addressing "who can I claim as a dependent", the two most controlling answers are whether the child lived with you for at least half the year, and whether he/she contributed more than half of his/her own support for 2016. The IRS further notes that: A person is considered to have lived with you during periods of time when one or both of you are temporarily absent due to special circumstances such as: Illness, Education, Vacation, or Military service. At least in the first "Plebe" year at a service academy, it seems to me that if the kid has spent more than half of his nights in mom and dad's home, and mom and dad paid for all of the support prior to sending him/her off to the academy, mom and dad (assuming filing jointly) should be able to claim the kid as a dependent. I guess the contrary argument could be whether the kid is paying for more than half of his/her support. To me the value of what the kid is receiving in terms of educational and room and board cost from the academy is not dispositive at all. The question, according to the IRS, is whether the claimed dependent is contributing more than half; not whether someone else is. I suppose that an argument could be made that because the child has earned the cost of education, room and board, that it is the child who is paying for the same. In my assessment though, a better (and admittedly more self serving) analysis is that the child is attending a school which does not charge its students for the cost of the education, room and board, and that the child does make a contribution, but the contribution is limited to the amount which is withdrawn from his/her salary, and applied to uniforms, computers....
Although some of you know that I am a lawyer (a judge), I qualify my comments by admitting that I am in no way a tax guy, and am just trying to figure this out like the rest of you. To provide perspective, my mother, who has only a catholic school HS diploma, and is 85 years old, is who I usually call with my general tax questions. I use Turbo Tax because I'm not knowledgeable to do it without the software. LOL. So just sharing thoughts and conclusions here, and take it only for what it is worth.
Does USAFA not send a letter stating how much the AF provided in support of the cadet? I know that USMA does, and for 2016 the figure is over $40,000. About the only instance where I have ever seen a cadet/mid parent be able to claim their kid as a dependent during the year they started the academy is if they attended boarding school before that. And even then, the numbers might come pretty close but not beat out the military support. It has nothing to do with the number of nights spent at home, but who provided more $$$ for them. In nearly every case, the military wins, and you no longer have a dependent!
I could not find the current letter but this dated information is the same as I recall reading when DD was a plebe. You can contact the treasurer's office and they can provide the updated letter.
http://www.usma.edu/parents/SiteAssets/SitePages/Resources/TAX MEMO 2012.pdf
I think the key is, rather, whether it is the claimed dependent (the cadet), or someone else (the federal government) which is providing the support. It seems that the academies have for years been claiming that they have been providing it. If that is the case, then the dependent is not providing it.The key to your comments/questions above is "scholarship". According to the Academies, the IRS does not consider the money invested in/spent on the cadets as scholarships.
The Academies reference IRS pub 17, but I looked through it and really couldn't find anything that specific to the cadets' situation.
A CPA with more expensive software would hopefully be able to pinpoint the rule, pub, etc. from the IRS.