The tax court recently denied the first-time homebuyer credit to a couple because they did not meet the requirements. They claimed to have moved out of their old home more than three years before they purchased the new home.
The court looked at the facts and circumstances and decided they did not meet the three-year requirement of not owning a home before the new home purchase.
Under Internal Revenue Service code Section 36, "a first-time homebuyer can claim the special tax credit if they did not own a principal residence for three years before the date of the purchase of a home."
The taxpayers claimed they stopped using the old home as their principal residence in February 2006. The court did not agree.
Some of the facts the court determined included:
• The taxpayers bought the old home in 1974.
• They listed it for sale February 2006.
• They rented an apartment on June 1, 2007.
• The sale of the old home was done June 6, 2007.
• The new home was purchased July 28, 2009.
• They claimed the homebuyer tax credit on their 2008 income tax return.
Between February 2006 and June 2007 they spent considerable time at the home of the wife's parents. They did not pay rent or utilities at the parents' home.
Between February 2006 and June 6, 2007, they continued to use the old home.
• They left the furniture in the old home.
• They used the old home address on their income tax return.
• They stayed at the old home overnight and hosted holiday parties there.
• They continued to access the Internet from the old home.
• They received bills and correspondence at the old home.
It was important to note they used the old home address on their tax returns and for bills and correspondence.
The court decided they had not abandoned the old home in 2006. That meant the three-year period requirement was not met and they were not entitled to the special tax credit for first-time homebuyers.
It's interesting how Congress defines a "first-time" homebuyer.
Did you hear, "Education is reading the fine print ... experience is what you get if you don't."
• John Bullis is a certified public accountant, personal financial specialist and certified senior adviser serving Carson City for 45 years. He is founder emeritus of Bullis and Company CPAs, LLC.
