T.C. Memo. 2015-44
UNITED STATES TAX COURT
ADA MAE PITTMAN, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 26575-12. Filed March 16, 2015.
Ada Mae Pittman, pro se.
Christopher A. Pavilonis and A. Gary Begun, for respondent.
MEMORANDUM OPINION
GOEKE, Judge: Respondent determined a $7,500 deficiency in petitioner’s
Federal income tax for 2008 and a $1,500 accuracy-related penalty under section
6662.1 Respondent has conceded that pursuant to Rand v. Commissioner, 141
Unless otherwise indicated, all section references are to the Internal
1
Revenue Code in effect for the year at issue, and all Rule references are to the Tax
Court Rules of Practice and Procedures.
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[*2] T.C. 376, 395-396 (2013), the accuracy-related penalty under section 6662(a)
does not apply. Accordingly, the only remaining issue for our decision is whether
petitioner is entitled to the first-time homebuyer credit provided in section 36. For
the reasons explained herein, we hold that petitioner is not entitled to the first-time
homebuyer credit.
Background
All the facts in evidence have been stipulated and are so found. Petitioner
resided in Florida when she filed the petition.
On January 22, 2007, James Piotrowski, Jr., entered into an agreement to
lease to petitioner the residence at 8348 Pepperwood Drive, Jacksonville, Florida
(Pepperwood residence).2 On January 22, 2007, Piotrowski and petitioner also
entered into an option contract for petitioner to acquire the Pepperwood residence
which expired January 31, 2008. Petitioner was required to meet certain
conditions in order to exercise the option contract, including closing on the
purchase of the home; failure to meet these conditions would result in the option
contract’s becoming void. Petitioner paid a $1,250 option fee that would be
applied to the purchase price if the option contract was exercised. Petitioner also
2
Piotrowski acted on behalf of his wholly owned company Bluefin
Investment Group, Inc., a title company that held real estate investment properties,
including the Pepperwood residence.
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[*3] paid an additional $150 per month to be applied against the purchase price if
the option contract was exercised. Petitioner did not exercise the option contract
because she was unable to obtain adequate financing for the purchase. Petitioner
and Piotrowski never executed a sales contract for the Pepperwood residence.
Piotrowski filed for chapter 7 bankruptcy on November 26, 2008.3 On
March 9, 2009, petitioner filed an adversary complaint against Piotrowski because
of his alleged failure to sell the Pepperwood residence to her. Petitioner’s
bankruptcy court pleadings indicate she never purchased the Pepperwood
residence and never acquired title to it. Petitioner contended that Piotrowski
intended to defraud her with respect to the option contract. Petitioner’s adversary
complaint in bankruptcy court against Piotrowski indicates that she entered into an
option contract to purchase the Pepperwood residence. However, petitioner never
exercised the option contract, and her adversary proceeding against Piotrowski
was dismissed.
Petitioner resided at the Pepperwood residence temporarily. Petitioner
provided a cable bill that showed she received cable service at the Pepperwood
residence. However, petitioner did not produce a U.S. Department of Housing and
Urban Development settlement statement, a deed, a closing statement, an executed
3
Piotrowski passed away on November 25, 2010.
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[*4] purchase agreement, or any other document to substantiate that she ever
purchased or acquired an interest in the Pepperwood residence.
Petitioner timely filed her 2008 Federal income tax return. Petitioner’s
income was reduced by various deductions and exemptions, resulting in taxable
income of $228 and a tax liability of $24. Petitioner claimed a first-time
homebuyer credit of $7,500.
Petitioner timely filed a petition with this Court requesting redetermination
of the deficiency and the accuracy-related penalty for the 2008 tax year. Petitioner
attached Form 12661, Disputed Issue Verification, to her petition, which stated
that she did not owe the adjustment amount of $10,212.47.
Discussion
As a general rule, the taxpayer bears the burden of proving by a
preponderance of the evidence that the Commissioner’s determinations are
incorrect. Rule 142(a); Welch v. Helvering, 290 U.S. 111, 115 (1933). Moreover,
credits are a matter of legislative grace, and the taxpayer bears the burden of
proving that he or she is entitled to any credit claimed. Deputy v. du Pont, 308
U.S. 488, 493 (1940); Segel v. Commissioner, 89 T.C. 816, 842 (1987). Section
36(a) allows an individual who is a first-time homebuyer of a principal residence
in the United States to claim a tax credit for the year the residence is purchased.
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[*5] Respondent contends that petitioner is not entitled to the claimed first-time
homebuyer credit because she did not purchase the residence and is not a “first-
time homebuyer”. We agree.
A first-time homebuyer is any individual who has had no present ownership
interest in a principal residence during the three-year period ending on the date of
the purchase of the principal residence in question. Sec. 36(c)(1); Foster v.
Commissioner, 138 T.C. 51, 53 (2012). The term “purchase” means any
acquisition, but only if (i) the taxpayer did not acquire the property from a related
person and (ii) the taxpayer’s basis in the property is not determined, in whole or
in part, by reference to the adjusted basis of the property in the hands of the person
from whom the taxpayer acquired the property, or determined under section
1014(a). Sec. 36(c)(3). To decide when a sale of property is complete for tax
purposes, we examine all the surrounding facts and circumstances. Baird v.
Commissioner, 68 T.C. 115, 124 (1977). However, the focus of our inquiry is on
when the benefits and burdens of ownership shifted. Id. Generally, a transfer is
complete upon the earlier of the transfer of title or the shift of the benefits and
burdens of ownership. Deyoe v. Commissioner, 66 T.C. 904, 910 (1976) (citing
Dettmers v. Commissioner, 430 F.2d 1019, 1023 (6th Cir. 1970), aff’g Estate of
Johnston v. Commissioner, 51 T.C. 290 (1968)).
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[*6] An option to purchase in Florida does not give the optionee an equitable
interest in realty until the option is exercised. Mathews v. Kingsley, 100 So. 2d
445, 446 (Fla. Dist. Ct. App. 1958). Until an optionee exercises the right to
purchase in accordance with the terms of the option, the optionee has no estate,
either legal or equitable, in the lands involved. Old Port Cove Holdings, Inc. v.
Old Port Cove Condominium Ass’n One, Inc., 986 So. 2d 1279, 1286-1287 (Fla.
2008). Instead, it has been long held under Florida law that “‘the status of parties
to the ordinary lease with an option to purchase remains that of landlord and
tenant until the option is exercised and * * * the lessee has no equitable interest in
the property.’” Id. at 1287 (quoting Leon Cnty. Educ. Facilities Auth. v.
Hartsfield, 698 So. 2d 526, 530 (Fla. 1997)).
The provisions of section 36(c) are clear. A taxpayer must actually acquire
a property in order to claim the first-time homebuyer credit. Petitioner did not
provide any documentation substantiating her purchase of the Pepperwood
residence. Additionally, the option contract was never exercised and petitioner did
not have an equitable interest in the Pepperwood residence as a result. It is clear
that petitioner never purchased the Pepperwood residence and therefore is not
entitled to the claimed first-time homebuyer credit.
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[*7] In reaching our holdings herein, we have considered all arguments the
parties made, and to the extent we did not mention them above, we conclude they
are moot, irrelevant, or without merit.
To reflect the foregoing,
Decision will be entered for
respondent as to the deficiency and for
petitioner as to the accuracy-related penalty
under section 6662(a).