Employer X sponsors a cafeteria plan in which employees can elect core medical coverage among other options. Assume that Employee A has elected employee plus two or more health coverage for 2007 because s/he has two children from a prior marriage. During 2007, A acquires domestic partner B. Because there is no additional cost of coverage for adding B, A's health coverage amount does not increase. Assuming that the difference between employee plus one dependent and employee plus two or more dependent coverage is $1,000, how does one calculate the amount A has to include in his/her gross income because of adding B as a dependent? Is there no imputation or does the incremental cost of having at least two dependents get divided pro rata between A's child and B?

I would say pro rata between A's children and B. In other words, 1/3 of the dependent cost is imputed (you said there were 2 children).
However, other reasonable methods would be acceptable as long as all future similar cases are treated the same way.

Problem: The fair market value is supposed to be imputed. The question is, what is the fair market value?
Is it 1/3 of the dependent cost for that employer, or is it the cost of an individual insurance policy for that person, providing like benefits?

For simplicity, you would want to stick with pro rating the employer (or carrier's suggested rate) cost.