For the 2014 tax year my alien spouse and I (US citizen living overseas) will file 'Married filing separately' because she is making a 1040NR expatriate return, which will include f8854. She is a resident alien for Jan-Jul 2014 and a non-resident alien effective mid July 2014 when her I-407 is accepted at the US consulate. During 2014 she will have no US source income, but will receive foreign source income throughout the whole year. Can I claim a 'spouse exemption' on my 1040 if she does not claim a personal exemption for herself on her 1040NR?
Here's what the IRS pub 501 has to say on the matter:
Separate return. If you file a separate return, you can claim an exemption for your spouse only if your spouse had no gross income, is not filing a return, and was not the dependent of another taxpayer. This is true even if the other taxpayer does not actually claim your spouse as a dependent. You can claim an exemption for your spouse even if he or she is a nonresident alien; in that case, your spouse must have no gross income for U.S. tax purposes and satisfy the other conditions listed above.
Since your wife does file a tax return - you cannot claim her exemption.