Decision will be entered for petitioner.
P entered into a contract for deed to purchase a house in 2008, took possession of the house in 2008, and claimed the first-time homebuyer tax credit pursuant to
R argues that P is not entitled to the first-time homebuyer tax credit for two reasons. First, R argues that P took possession of the house under a contract for deed and therefore has not "purchased" the house pursuant to
Held: Pursuant to Texas property law, the contract for deed granted P equitable title to the house, and P therefore has "purchased" the house under
Held, further,
Held, further, P has established that he intends to occupy the house as his principal residence as soon as the necessary renovations are complete, and he is therefore entitled to the first-time homebuyer tax credit for 2008.
*160 HAINES, Judge: Respondent determined a deficiency in petitioner's 2008 Federal income tax of $7,500. The sole issue for decision is whether petitioner is entitled to the first-time homebuyer tax credit (FTHBC) for 2008 pursuant to
Some of the facts have been stipulated and are so found. The stipulation of facts, together with the attached exhibits, is incorporated herein by this *46 reference. At the time petitioner filed his petition, he resided in Texas.
Petitioner works in Rice, Texas, and has been working there since 1999. Throughout most of that time, petitioner lived in Dallas, which is approximately 50 miles from Rice. Because of the distance and the commuting cost, petitioner began looking for a permanent place to live in Rice. In 2008 petitioner found a house for sale in Rice (the Rice house). Petitioner also learned through an advertisement that he might be eligible for the FTHBC. Petitioner confirmed the possibility of the FTHBC through his own research on the Internal Revenue Service (IRS) Web site and discussions with his tax preparer.
On December 18, 2008, petitioner entered into an agreement for deed to purchase (contract for deed) the Rice house from Capital T Properties (Capital T) for $75,000 and took possession of the house. Petitioner paid Capital T an initial downpayment of $2,000 and agreed to pay the balance of the *161 purchase price together with 7 percent interest over 184 months. Although petitioner took possession of the Rice house under the contract for deed, legal title does not transfer from Capital T to petitioner until petitioner has *47 paid the final monthly installment. Petitioner is required to pay all property taxes attributable to the Rice house for all periods after December 18, 2008.
The Rice house required renovations before being ready for occupancy. Petitioner planned to use the FTHBC to fund the necessary renovations and could not afford the renovations without the credit. In January 2009 petitioner claimed the FTHBC on his 2008 Federal income tax return. In February 2009 petitioner received $7,500 for the FTHBC.2 As a result, in March 2009 renovations on the Rice house began.
During the period of renovation, petitioner lived in a rental house in Dallas until a fire left it uninhabitable. He has since lived with his daughter in Dallas. On August 20, 2009, the IRS sent petitioner a notice of deficiency disallowing the FTHBC. As a result, petitioner suspended renovations of the Rice house. On November 18, 2009, the Court filed petitioner's *48 timely petition challenging respondent's determination with respect to the FTHBC.
OPINIONI. FTHBCRespondent contends that petitioner fails to qualify for the FTHBC for two reasons. First, respondent argues that petitioner *162 took possession of the Rice house under contract for deed and has not acquired legal or equitable title of the property. Next, respondent argues that even if petitioner satisfies the "purchase" requirement of
We first address the issue of whether petitioner "purchased" the Rice house in 2008.3To decide when a transfer is complete for tax purposes, we examine all the surrounding facts and circumstances, no single one of which is controlling.
In a Federal tax controversy, State law controls the determination of the taxpayer's interest in the property, *50 and the tax consequences are then determined under Federal law.
We reviewed a similar transaction under Texas property law in
In finding for the taxpayers, we relied on the holding by the Supreme Court of Texas in
Next, respondent argues that the Rice house does not satisfy the "principal residence" requirement of
In the case of an individual who is a first-time homebuyer of a principal residence in the United Statesduring a taxable year, there shall be allowed as a credit *53 against the tax imposed by this subtitle for such taxable year an amount equal to 10 percent of the purchase price of the residence. [Emphasis added.]
Pursuant toThe appropriateness of this prospective analysis is further supported by
Respondent argues that because petitioner never occupied the Rice house it is not his "principal residence" and he is not entitled to the FTHBC. Petitioner argues that he is entitled to the FTHBC because he intended to occupy the Rice house as his principal residence as soon as renovations were completed. He further argues that he intended to use the FTHBC to pay for the renovations and that he was forced to *165 suspend work on the Rice house when he learned that the FTHBC had been disallowed. Petitioner therefore argues that he was not given the opportunity to establish the Rice house as his principal residence.
We agree with petitioner.
In *56 reaching our holdings herein, we have considered all arguments made, and, to the extent not mentioned above, we conclude they are moot, irrelevant, or without merit.
To reflect the foregoing,
Decision will be entered for petitioner.
Footnotes
1. Unless otherwise indicated, all section references are to the Internal Revenue Code, as amended for the year at issue.↩
2. Although referred to as a "credit", for the tax year in question (i.e., 2008) the FTHBC is essentially a governmental, non-interest-bearing loan inasmuch as the recipient taxpayer repays the credit by an increase in the income tax rate over a 15-year period.
Sec. 36(f)(1)↩ .3.
Sec. 36(c) provides that the term "purchase" means any acquisition, but only if: (1) The property is not acquired from a related person; or (2) the basis of the property in the hands of the acquiring person is not determined in whole or in part by the basis of the property in the hands of the seller, or undersec. 1014(a)↩ . Neither of these limitations is applicable in this case.4.
Sec. 36(f)(7)↩ defines the term "recapture period" as the 15 taxable years beginning with the second taxable year following the taxable year in which the purchase of the principal residence for which the FTHBC was allowed was made.5. The prospective analysis adopted for a taxpayer that "purchases" and "renovates" a home is different from the approach mandated in the case of a taxpayer that "constructs" a new home.
Sec. 36(c)(3)(B) provides that a "residence which is constructed by the taxpayer shall be treated as purchased by the taxpayer on the date the taxpayer first occupies such residence."Sec. 36(c)(3)(B) requires that the taxpayer occupy a newly constructed home before qualifying for the FTHBC. We anticipate that the distinction between a taxpayer who "purchases" and "renovates" a home and a taxpayer who "constructs" a new home may give rise to future questions. It is not this Court's job to anticipate and decide cases that are not yet before it.Gates v. Commissioner, 135 T.C. 1">135 T.C. 1 , 17↩ (2010).