Do Ted's parents meet the relationship test for claiming them as dependents?

The correct answer is based on the fact that Ted's parents qualify under the relationship test for being dependents. The IRS defines a qualifying relative as a relative who meets specific criteria, and one key factor is the relationship. Ted's parents inherently meet this requirement simply by being his parents, regardless of other conditions such as living arrangements or income levels.

To claim dependency, it is recognized that parents are always considered qualifying relatives, therefore meeting the relationship test. This allows them to be claimed as dependents, assuming other requirements like income and support tests are also satisfied.

The other options mention living arrangements or income, which pertain to different aspects of the dependent qualifications but do not negate the fact that Ted's parents meet the relationship standard necessary for dependency. The essence of the relationship test is about being related, making the choice that affirms their qualifying status based solely on their parental relationship accurate.