T.C. Summary Opinion 2012-35
UNITED STATES TAX COURT
RAYFORD JAY RICHARDSON, JR., Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 10584-10S. Filed April 19, 2012.
Rayford Jay Richardson, Jr., pro se.
Clint J. Locke and John W. Sheffield III, for respondent.
SUMMARY OPINION
MARVEL, Judge: This case was heard pursuant to the provisions of section
74631 of the Internal Revenue Code in effect when the petition was filed. Pursuant
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Unless otherwise indicated, all section references are to the Internal Revenue
Code, as amended, in effect for the relevant period, and all Rule references are to
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to section 7463(b), the decision to be entered is not reviewable by any other court,
and this opinion shall not be treated as precedent for any other case.
Respondent determined a deficiency in petitioner’s 2008 Federal income tax
of $8,000. The sole issue for decision is whether petitioner is entitled to the section
36 first-time homebuyer credit (FTHBC) for 2008.
Background
Some of the facts have been stipulated. The stipulation of facts and facts
drawn from stipulated exhibits are incorporated herein by this reference. Petitioner
resided in Alabama when he filed his petition.
After graduating from Hardy University in approximately 2004 with a
bachelor’s degree in business management, petitioner began working for his
family’s car wash business. Petitioner also began to engage in real estate
transactions. In 2005 petitioner acquired a lot in Timberland Estates (Timberland
property) from his parents, constructed a home on the lot, and then sold the property
at a profit. In 2005 petitioner also purchased improved property on Springview
Drive (Springview Drive property) and renovated it. Although petitioner intended to
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the Tax Court Rules of Practice and Procedure.
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sell the Springview Drive property and attempted to do so, he now uses it as a rental
property.
In February 2006 petitioner purchased improved property on Highpoint Drive
(Highpoint Drive property) and renovated it. Although petitioner initially intended
to sell the Highpoint Drive property, he retained ownership of the property and, at
some point, he began to rent it. Petitioner received correspondence at the Highpoint
Drive address during 2006 and 2007. For 2005, 2006, and 2007 petitioner claimed
home mortgage interest deductions for the Highpoint Drive property.2 For 2008
petitioner claimed a homestead exemption for the Highpoint Drive property by filing
a claim with the Revenue Commissioner for Mobile County, Alabama.
On October 1, 2007, petitioner purchased an unimproved lot on Rue Royal in
Mobile, Alabama (Rue Royal property). Petitioner obtained a construction loan and
constructed a personal residence on the property. Petitioner moved into the
residence on the Rue Royal property on May 9, 2009.
2
For 2007 petitioner reported a deduction for mortgage interest with respect
to the Highpoint Drive property on both Schedule A, Itemized Deductions, and
Schedule E, Supplemental Income and Loss. On January 4, 2011, Jerome C. Olsen,
a certified public accountant, submitted petitioner’s Form 1040X, Amended U.S.
Individual Income Tax Return, for 2007. Petitioner did not file his Form 1040X
until after he filed a petition in this Court for redetermination of the deficiency
respondent determined for 2008.
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Petitioner timely filed his Form 1040, U.S. Individual Income Tax Return, for
2008.3 On his Form 1040, petitioner claimed a filing status of single and listed the
Rue Royal address as his current home.4 Petitioner attached to his return a Form
5405, First-Time Homebuyer Credit, on which he claimed an $8,000 FTHBC with
respect to the Rue Royal property.5 Petitioner’s Form 1040 included a Schedule E,
Supplemental Income and Loss, on which he reported rents received and expenses
with respect to the Springview Drive and Highpoint Drive properties.6 Petitioner
claimed a refund of $11,196 for 2008.
3
Mr. Olsen prepared petitioner’s return for 2008. Mr. Olsen calculated the
amount of petitioner’s FTHBC by analyzing petitioner’s salary and the closing
statement for the Rue Royal property. In preparing the return, Mr. Olsen relied on
petitioner’s representation that he was entitled to the credit.
4
Generally, a taxpayer is eligible for a maximum FTHBC of $8,000. See sec.
36(b)(1)(A). If the taxpayer uses the filing status of married filing separately, the
taxpayer is eligible for a maximum FTHBC of $4,000. See sec. 36(b)(1)(B).
Petitioner testified that he married in December 2008, but he submitted to
respondent signed affidavits stating that he married in 2009. Respondent contends
that if petitioner is eligible for the FTHBC, this Court should limit the FTHBC to
$4,000 because petitioner testified that he married in 2008. Because we hold that
petitioner is not entitled to the FTHBC, we need not decide this issue.
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A taxpayer may claim an FTHBC on his 2008 tax return for a principal
residence purchased after December 31, 2008, and before December 1, 2009. See
sec. 36(g). Therefore, if petitioner is eligible for the FTHBC with respect to the Rue
Royal property, he may claim the FTHBC on his 2008 return even though he did not
begin occupying the Rue Royal property until 2009. See sec. 36(c)(3)(B).
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On an attached Schedule A petitioner claimed a home mortgage interest
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On October 5, 2009, respondent mailed petitioner a letter requesting
additional information to substantiate his claimed FTHBC. Respondent requested
that petitioner provide either a copy of the closing contract bearing all parties’
signatures, a copy of the document showing property transfer tax paid upon
purchase, or an original letter from a government entity that showed “the property
address, purchase price, and purchase date, and seller and buyer names”. If no
single document showed all of the required information, respondent directed
petitioner to provide a combination of documents. Respondent also requested a
copy of the occupancy permit for petitioner’s newly constructed home. Petitioner
partially complied with respondent’s request by mailing to respondent a copy of the
settlement statement with no seller signature, a tax information sheet, and a copy of
the occupancy permit for the Rue Royal property. On April 5, 2010, respondent
mailed to petitioner a notice of deficiency in which respondent determined that he
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was not entitled to claim any portion of the FTHBC.
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(...continued)
deduction of $4,115. Mr. Olsen testified that he erroneously reported on
petitioner’s 2008 return a home mortgage interest deduction with respect to the Rue
Royal property.
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Discussion
I. Burden of Proof
Generally, the Commissioner’s determinations in a notice of deficiency are
presumed correct, and the taxpayer bears the burden of showing the determinations
are erroneous. Rule 142(a); Welch v. Helvering, 290 U.S. 111, 115 (1933). The
burden of proof shifts to the Commissioner only if the taxpayer produces credible
evidence to support the deduction or position, the taxpayer has complied with the
substantiation requirements, and the taxpayer has cooperated with the Secretary7
with regard to all reasonable requests for information. Sec. 7491(a); see also
Higbee v. Commissioner, 116 T.C. 438, 440-441 (2001).
Petitioner does not contend that section 7491(a)(1) applies, and the record
does not permit us to conclude that he satisfied the requirements of section
7491(a)(2). Accordingly, petitioner bears the burden of proving that he properly
claimed the FTHBC on his return.
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The term “Secretary” means “the Secretary of the Treasury or his delegate”,
sec. 7701(a)(11)(B), and the term “or his delegate” means “any officer, employee,
or agency of the Treasury Department duly authorized by the Secretary of the
Treasury directly, or indirectly by one or more redelegations of authority, to perform
the function mentioned or described in the context”, sec. 7701(a)(12)(A).
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II. Eligibility for FTHBC
Section 36(a) allows a credit for a first-time homebuyer of a principal
residence. A first-time homebuyer is “any individual if such individual (and if
married, such individual’s spouse) had no present ownership interest in a principal
residence during the 3-year period ending on the date of the purchase of the
principal residence to which this section applies.” Sec. 36(c)(1). When the
taxpayer constructs a residence, the date of purchase of the residence is “the date
the taxpayer first occupies such residence.” Sec. 36(c)(3)(B).
Petitioner is eligible as a first-time homebuyer if he had no ownership interest
in a principal residence after May 8, 2006, and before May 9, 2009. See Foster v.
Commissioner, 138 T.C. __, __ (slip op. at 3-4) (Jan. 30, 2012). Respondent
contends that petitioner was not a first-time homebuyer because he held an
ownership interest in the Highpoint Drive property and used the Highpoint Drive
property as his principal residence. Petitioner does not dispute that he owns the
Highpoint Drive property, but he contends that he resided with his parents at their
home on Brandy Run Road and that he did not own that property.
For purposes of the FTHBC, section 36(c)(2) provides that the term
“principal residence” has the same meaning as in section 121. Whether a taxpayer
uses a property as his principal residence depends upon all the facts and
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circumstances. See sec. 1.121-1(b)(2), Income Tax Regs. Ordinarily, the
taxpayer’s principal residence is the property the taxpayer uses during most of the
year. See id. Section 1.121-1(b)(2), Income Tax Regs., provides:
(2) Principal residence. * * * In addition to the taxpayer’s use of
the property, relevant factors in determining a taxpayer’s principal
residence, include, but are not limited to--
(i) The taxpayer’s place of employment;
(ii) The principal place of abode of the taxpayer’s family
members;
(iii) The address listed on the taxpayer’s federal and state tax
returns, driver’s license, automobile registration, and voter
registration card;
(iv) The taxpayer’s mailing address for bills and
correspondence;
(v) The location of the taxpayer’s banks; and
(vi) The location of religious organizations and
recreational clubs with which the taxpayer is affiliated.
In analyzing whether a taxpayer uses a particular property as his principal residence,
we also have considered whether the taxpayer claimed a homestead tax credit on the
property. See Wickersham v. Commissioner, T.C. Memo. 2011-178. A property’s
status as rental property does not prevent this Court from finding that the property is
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the taxpayer’s principal residence. See Clapham v. Commissioner, 63 T.C. 505,
511-512 (1975).
For 2008 petitioner claimed a homestead exemption for the Highpoint Drive
property. On petitioner’s assessment record, the Highpoint Drive property is
identified as class 3 property. Under Alabama law, class 3 property includes “[a]ll
agricultural, forest, and residential property”. Ala. Code. sec. 40-8-1(a)
(LexisNexis 2011). “Residential property” includes “[r]eal property, used by the
owner thereof exclusively as the owner’s single-family dwelling.” Ala. Code. sec.
40-8-1(b)(6). Class 3 property in Mobile County also includes a residential
property where the owner not only uses the property as the owner’s dwelling but
also rents a room or portion of the property to a tenant. See Howell v. Malone, 388
So. 2d 908, 914-915 (Ala. 1980).
For 2005, 2006, and 2007 petitioner claimed home mortgage interest
deductions for the Highpoint Drive property. Petitioner could properly claim a
home mortgage interest deduction if he paid or accrued interest on indebtedness
with respect to a qualified residence. See sec. 163(h)(3)(A). A “qualified
residence” is defined as the taxpayer’s principal residence, within the meaning of
section 121, and one other residence that the taxpayer used as a residence during the
taxable year. See sec. 163(h)(4)(A)(i)(I) and (II).
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In 2006 Whitney National Bank, E Trade Clearing LLC, and Chase Home
Finance LLC mailed information returns8 regarding petitioner’s investment and
interest income and mortgage interest expense to petitioner at the Highpoint Drive
address. In 2007 E Trade Clearing LLC, Scottrade, Inc., and Chase Home Finance
LLC, mailed information returns9 regarding petitioner’s investment income and
mortgage interest expense to petitioner at the Highpoint Drive address.10
Petitioner testified that during 2008 he resided with his parents at the Brandy
Run Road property.11 Petitioner further testified that he did not use the Highpoint
Drive property as his personal residence.12 The record includes copies of
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Whitney National Bank mailed to petitioner a Form 5498, IRA Contribution
Information, and a Form 1099-INT, Interest Income. E Trade Clearing LLC mailed
to petitioner Forms 1099-B, Proceeds From Broker and Barter Exchange
Transactions. Chase Home Finance LLC mailed to petitioner Forms 1098,
Mortgage Interest Statement.
9
E Trade Clearing LLC and Scottrade, Inc., mailed to petitioner Forms 1099-
B. Chase Home Finance LLC mailed to petitioner Forms 1098.
10
In addition to the Form 1099-B, Scottrade, Inc., mailed a Form 5498 to
petitioner at the Brandy Run Road address.
11
Petitioner also testified that he lived in a hotel during most of this time.
12
In the absence of corroborating evidence, we are not required to accept
petitioner’s self-serving testimony. See Shea v. Commissioner, 112 T.C. 183, 189
(1999). To corroborate his testimony, petitioner introduced a document titled
“Affidavit” signed by Rayford J. Richardson and Vicky H. Richardson stating that
he lived with his parents until he married in 2009. However, the document does not
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petitioner’s Forms 1040 for 2006 and 2007, both of which list his parents’ home on
Brandy Run Road as his home address.13
Petitioner owned the Highpoint Drive property during 2006-09. He claimed a
homestead exemption and home mortgage interest deductions with respect to the
Highpoint Drive property, and he received at least some of his bills and
correspondence there. Petitioner did not introduce any credible evidence, such as
testimony from his parents or from the tenant renting the Highpoint Drive property,
to prove that he did not live at the Highpoint Drive property at any time between
May 8, 2006, and May 9, 2009. He also failed to prove what address he listed on
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include any statement that it was signed under penalty of perjury. In addition,
petitioner introduced the testimony of Mr. Olsen that the Highpoint Drive property
was a rental property and that, to the best of his knowledge, petitioner never resided
there. When preparing petitioner’s returns, however, Mr. Olsen did not make any
kind of inquiry about petitioner’s personal residence or review prior-year returns to
verify his address during those years.
13
Although petitioner received some correspondence at the Brandy Run Road
address, this evidence is inconclusive given the fact that he also received
correspondence at the Highpoint Drive address. See sec. 1.121-1(b)(2)(iv), Income
Tax Regs. Although petitioner contends that he used the Highpoint Drive address
for privacy reasons, we cannot accept his contention that he had a greater
expectation of privacy with respect to the Highpoint Drive property when he
testified that he was renting the property to a third party. Petitioner contends that he
used the Highpoint Drive address to keep financial information private from his
parents; however, in 2008 Chase Home Finance LLC mailed two Forms 1098 to
him at the Brandy Run Road address.
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his State tax returns, driver’s license, automobile registration, or voter registration
card. See sec. 1.121-1(b)(2)(iii), Income Tax Regs.
Petitioner has failed to convince us that during 2007 and 2008 he did not use
the Highpoint Drive property as his principal residence and that he was living with
his parents at their home on Brandy Run Road. Accordingly, we find that petitioner
has failed to prove that he was an eligible first-time homebuyer for purposes of the
FTHBC. We sustain respondent’s determination.
We have considered the parties’ remaining arguments, and to the extent not
discussed above, conclude those arguments are irrelevant, moot, or without merit.
To reflect the foregoing,
Decision will be entered
for respondent.