Attorney-at-Law

OLD TAX CREDITS NEVER DIE

In Uncategorized on 11/06/2012 at 10:17

And they don’t fade away either, unlike Gen. MacArthur’s old soldiers. They are embalmed in Tax Court opinions, which, as we are reminded by the Tax Court’s “taxpayer info” link on its website “(G)enerally… is issued in a regular case when the Tax Court believes it involves a sufficiently important legal issue or principle.”

Once again, the First Time Homebuyer Tax Credit Second Edition (FTHBTC2) presents what Tax Court deems “a sufficiently important legal issue or principle”, even though the tax credit giving rise thereto has long since faded away. But the opinion in Robert D. Packard, 139 T. C. 15, filed 11/5/12, does show that proper tax planning is as important a part of planning a wedding as the ceremony, the reception, and the Viennese dessert table.

Bob marries Marianna in November, 2008, while FTHBTC1 (the $7500, 15-year loan) is still on the books. But they don’t move in together until they buy a house on December 1, 2009, after FTHBTC2 (the $8000 credit) comes on the scene. Marianna owned her prior principal residence for more than five years before buying the new house. Bob owned no principal residence for three years preceding the purchase; he was a renter throughout.

Marianna claims she’s qualified for FTHBTC2 under the Section 36(c)(6) longtime homeowner exception (owned for five years out of the past eight), and Bob claims he’s qualified under Section 36(c), as he didn’t own a principal residence for the past three years.

IRS says no, you can’t mix-and-match, you’re both either three-year non-owners or five-out-of-eight owners.

Why not mix-and-match, asks Judge Wells: “Paragraph (6) operates to expand the scope of the first-time homebuyer credit by treating an individual who has owned and resided in the same residence for the five-consecutive-year period as if that individual were a first-time homebuyer for purposes of section 36. By its terms, it provides an exception to the definition of first-time homebuyer pursuant to section 36(c), a definition that is provided in paragraph (1). In other words, the exception pursuant to paragraph (6) expands the definition of who qualifies as a first-time homebuyer pursuant to paragraph (1).

“It is a well-established rule of statutory construction that a statute is to be construed so as to give effect to its plain and ordinary meaning unless to do so would produce absurd or futile results.” 139 T. C. 15, at pp. 6-7 (Footnote omitted).

Congress intended that no couple could get the credit unless each qualified. But Congress didn’t say that each had to qualify under the same provision. IRS concedes that Bob and Marianna individually would qualify.

So summary judgment for Bob and Marianna. Great tax planning, guys!

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