Two things:

1.  Dad did not get $5,000, in the sense that the money was his own income that he sent to his FSA, though it is true that by putting it in the FSA it is tax-free.

2.  More importantly, I understood that if you have adequate childcare expenses, you can allocate the FSA to pay some of the expenses and the dependent care credit to cover the other expenses. 

I read IRR 1.21-1, but unfortunately it does not address the impact of an FSA on the availability of the credit.  Lots of sources on the internet answer the question in the affirmative, but I can't exactly prepare a tax return on the say-so of the internet!  🙂  So I guess I'm looking for some definitive answer as to whether ADDITIONAL expenses can use the dependent care credit after the FSA has been used for other expenses.

M.