T.C. Sum m ary Opi ni on 20 14 -6 5 UNITED STAT ES TAX COURT VERNON M. LESLIE, JR., Pet it io ne r v. COMM ISSI ONER OF INTERNAL REVENUE, Resp on de nt

Doc ke t No . 95 34 -1 2S . Fi le d J ul y 10 , 20 14 .
Vern on M. Lesl ie , Jr., p ro se. Leo na rdT. Prov en zal e, fo r res po nd en t.

SUMM ARY OPINION CARLUZZO, Spec ia l Tri al Ju dg e: Thi s ca se was h eardpu rs ua ntto th e pr ov is io ns of s ect io n 7 46 3 of t he Int ern al Rev enue Co de ineffe ctwhen th e 1 pe ti ti on was fi le d. Purs ua ntto sec ti on 74 63 (b ), th e d eci si on to be en te redis no t

Unl es s o th erwi se in di cat ed , sec ti on refe ren ces are t o the Int ern al Rev enue 1 Co de of 1 98 6, as am en de d, i n e ffec t fo r th e rel ev an t p eri od . Rul e ref eren ces are t o th e Tax Co urt Ru le s o f Prac ti ce an d P ro cedur e.- 2 -

rev ie wab le by any

othe r co urt, an d thi s o pi ni on sh al l n otbe tre at edas p rece de nt fo r an y othe r cas e. Ina no ti ce o f de fic ie nc y

date d J anua ry

25 , 20 12 (no ti ce), re sp on de nt de te rm in eda $9 73 de fic ie nc y inpe ti ti on er’s 2 00 8 F ed eral in co m e ta x. The is su e fo r de ci si on is whet he r pe ti ti on er i s en ti tl edto a se ct io n 3 6 fi rs tti m e h om eb uyer cred it(cre di t) a s cl ai m edonhi s 2 00 8 F ed eral in co m e ta x re tu rn (return) , or wh ethe r th e cre di t i s l im it edto th e am ou ntres po nd en t al lo wed . The res ol ut io n o f th e is su e d ep en ds up on whet he r fo r pu rp os es of c al cu lati ng th e cre di t th e co stof v ari ou s re pa irs are i nc lu dabl e in th e “pu rch as e p ric e” o f th e “pr in ci pa l 2 res id en ce” t o wh ic h the cred itrel at es . See s ec. 3 6. 3 Bac kg ro un d So m e o f th e fac ts ha ve be enst ip ul at edan d are s o fo un d. Atth e ti m e th e pe ti ti on was fi le d, p et it io ne r res id edinFlo rid a.

Pet it io ne r us edth e te rm

“ rep ai r” (i nc lu di ng it s v ari ou s d eri va ti ve s) 2 rep eat ed ly dur in g h is tri al tes ti m on y . W e u se th e te rm forco nv en ie nc e an d n otto su gg es t wh ethe r anexpe nd itur e sh ou ldor s ho ul d n otbe tak enin to acco un t i n the co m pu ta ti on of t he ba si s i n the rel ev an t p ro pe rty. See sec . 10 12 ; s ee al so sec . 10 16 (a)( 1) ; s ec. 1 .10 16 -2 (a), In co m e TaxReg s. The parti es di sa gr ee o ve r ho w th e “pu rch as e p ric e”, as de fin edinsec . 3 36 (c)( 4) , of p et it io ne r’s “pr in ci pa l re si de nc e” s ho ul d b e co m pu te d. Othe rwis e, th ey ag ree tha t p et it io ne r is en ti tl edto a se c. 36 cred it .- 3 -

On J anua ry

23 , 20 09 , pet it io ne r pu rch as eda ho us e in Po rt S t. Lu ci e, Fl or id a (s om et im es pro pe rty or h ou se ), fro m GMAC Mo rtg ag e, LLC (GMAC). GMAC ha d o bt ai ne d t it le to th e p ro pe rty as a re su ltof f or ecl os ur e p ro ceed in gs . Peti ti on er pa idGMAC $ 31 ,00 0 fo r th e p ro pe rty, andhe in curredan d p ai d s et tl em en t ex pe ns es of $ 30 0 (r ou nd ed ) inco nn ect io n wi th th e tr an sa ct io n. Ap pa ren tl y , th e ho us e was no t wel l m ai nt ai ne d o r se curedwhi le GMAC h el d t it le to th e p ro pe rty. The ho us e was vand al iz edan d m ig htha ve be enoc cupi edby one or m or e squa tt ers be fo re the da te pe ti ti on er p ur ch as edit . Afte r acqui rin g the pro pe rty pet it io ne r: (1 ) rep ai reda le ak in g/ de fect iv e wate r m ai n andth e res ul tantda m ag e to carp et s, fl oo rin g, an d drywall cau se d b y le ak in g wat er; (2) rem ov edor r em ed ia te d e xt en si ve m ol d andm il de w dam ag e; (3) rep la cedor r ep ai redbro ke n drywall ; (4 ) rep ai reda br ok engarag e d oo r; ( 5) rep ai red/re st or edth e b arri er fe nc e surro un di ng th e swi m m in g p oo l; an d (6 ) pu rch as edan d i ns ta ll edrep la cem en ts formis si ng or b ro ke n k it ch enap pl ianc es . So m e o r al l o f th e ab ov e were r equi redinord er t o m ak e th e h ou se habi tabl e an d t o cau se th e rel eas e o f a l ie n the n e nc um be rin g the pro pe rty in f

av orof t he lo cal ho us in g aut ho rit y . Peti ti on er, wh o i s a b ui ld in g c on tra ct or , occ up ie d the ho us e as- 4 -

hi s p rin ci pa l re si de nc e st art in g i n M ay 20 09 . By

th atti m e h e h adsp en t atlea st 4 $1 0,2 70 forth e rep ai rs an d the ap pl ianc es . Pet it io ne r’s return, wh ic h h e p rep ared , in cl ud es a Fo rm 54 05 , Firs t-Ti m e Hom eb uyer Cred itan d R ep aym en t o f th e Cre di t, tha t s ho ws a $ 4,1 57 cred it , cal cu la te d b y

tak in g o n 1 0% o f $4 1,5 70 , whi chis th e su m of t he pro pe rty’ s pu rch as e p ric e, $3 1,0 00 , pl us set tl em en t ch arg es , $3 00 , pl us at l eas t a p orti on of th e co st s o f rep ai rs an d app li an ces , $1 0,2 70 . Inth e n ot ic e res po nd en t d is al lo wed$1 ,02 7 o f th e cre di t, whi chis th e 5 po rti onof t he cred itas p et it io ne r co m pu te d a ttrib ut ab le to th e co st s o f th e rep ai rs an d app li an ces . Accor di ng to res po nd en t, tho se co st s ar e n ottak enin to acco un t i n th e co m pu ta ti on of p et it io ne r’s al lo wab le sec ti on 36 cred it . Dis cu ss io n Lik e d educ ti on s, cr ed it s ar e a m at te r of leg is la ti ve gra ce, an d the tax pa y er be ars th e b ur de n o f pr ov in g tha t h e o r sh e is en ti tl edto an y cred itcla im ed . See Ru le 14 2( a); Depu ty v. duPo nt , 30 8 U.S. 4 88 , 49 3 (1 94 0) ; New Co lo ni al Ice Co .

The ex actda te is ne ithe r kn ownno r im po rta nt . 4 Oth er ad jus tm en ts m ad e in th e n ot ic e o f de fic ie nc y are co m pu ta ti on al an d 5 wil l n otbe di sc us se d.- 5 -

v. Hel ve rin g, 2 92 U.S. 43 5, 4 40 (19 34 ); S eg el v. Co m m is si on er, 8 9 T.C. 8 16 , 84 2 (1 98 7) . 6 Sect io n 3 6( a) al lo ws a c red itfora fi rs t-t im e h om eb uyer of apri nc ip al res id en ce. As n ot ed , th e p art ie s ag ree tha t p et it io ne r is a fi rs t-t im e h om eb uyer withi n the m ean in g o f se ct io n 3 6. As re le va nthe re, the am ou ntof t he cred itis equa l t o 1 0% o f th e p ur ch as e pr ic e o f th e res id en ce, n otto ex ceed$8 ,00 0, ef fect iv e fo r pu rch as es m ad e o n o r aft er Ap ril 9, 2 00 8, an d b efo re Dece m be r 1, 2 00 9. Sec. 3 6( a), (b )(1 )(A), (h ). The

7 te rm “purch as e p ric e” i s d efi ne d i n s ect io n 3 6( c)(4 ) as th e “ ad jus te d b as is of t he pr in ci pa l re si de nc e o n the da te su chres id en ce i s p ur ch as ed .” Norm al ly, th e d at e th ata “ res id en ce i s p ur ch as ed ” is th e d at e o n wh ic h the tax pa y er t ak es leg al or equi tabl e ti tl e to th e res id en ce. Wood s v . Comm is si on er, 1 37 T.C. 15 9, 1 63 (2 01 1) . If th e ta xp ay er co ns tru ct s a r es id en ce, h owe ve r, th enth e d at e o f pu rch as e of th e res id en ce i s “ th e d at e th e ta xp ay er fi rs t o ccupi es su chres id en ce”. Se c. 36 (c)( 3) (B).

Pet it io ne r do es no t cl ai m th atth e p ro vi si on s o f se c. 74 91 (a) are ap pl ic ab le , 6 an d we p ro ceedas t ho ug h the y are n ot . Sec. 3 6( g) pro vi de s tha t a t ax pa y er wh o qua li fie d a s a f irs t-t im e h om eb uyer 7 fo r a res id en ce p ur ch as edbe twee n Dec em be r 31 , 20 08 , andDecem be r 31 , 20 09 , m ay cla im th e cre di t o n the tax pa y er’s 2 00 8 t ax return.- 6 -

Acco rd in g t o p et it io ne r, th e “ da te of p ur ch as e” i s a d ay du rin g M ay

20 09 whe n h e fi rs t o ccupi edth e h ou se as h is pri nc ip al res id en ce. Pet it io ne r supp orts hi s po si ti onan d h is co m

pu ta ti on of t he cred itup on th e g ro un d tha t h e co ns tru ct edth e pr op erty . Res po nd en t, o n the othe r ha nd , arg ue s tha t p et it io ne r di d n otco ns tru ct th e p ro pe rty. T he refo re, acc or di ng to res po nd en t, the “ da te of p ur ch as e” i s the da te pe ti ti on er t oo k t it le to th e p ro pe rty, tha t i s, o n o r ab ou t J anua ry 23 , 20 09 . For th e fo ll owi ng reas on s, we ag ree wi th res po nd en t. 8 Ourres earc h h as rev eal edno de fin it io ns forth e te rm s “ co ns tru ct ” o r

“ co ns tru ct ed ” fo r pu rp os es of s ect io n 3 6. Th e te rm s ar e n otde fin edinsec ti on 36 it se lf, o r it s co rres po nd in g re gu la ti on s, o r rel ev an t ca se law, or the st atut e’s le gi sl at iv e h is to ry . Thatbe in g s o, we co ns tru e th e te rm s as ord in ari ly and co m m on ly use d. Se e Co m

m is si on er v . Bro wn, 3 80 U.S. 56 3, 5 70 -5 71 (19 65 ); Cran e v . Commis si on er, 3 31 U.S. 1, 6 -7 (19 47 ); Tex aco Inc . & Subs . v. Co m m is si on er, 1 01 T.C. 57 1, 5 75 (19 93 ), aff’d, 9 8 F .3d82 5 (5 th Cir . 19 96 ); Ro m e I, Ltd . v. Co m

m is si on er, 9 6 T.C. 6 97 , 70 4 (1 99 1) ; Un io n P ac. Co rp . v.

Und er the cir cu m st an ces , we nee d n otad dr es s wh ethe r th e co st s o f th e 8 rep ai rs an d/ orap pl ianc es , or s om e p artof t ho se co st s, ar e p ro pe rly inc lu de d i n the co m pu ta ti on of t he ad

jus te d b as is of t he pro pe rty. See sec . 10 16 (a)( 1) ; s ec. 1.1 01 6- 2( a), In co m e TaxReg s.- 7 -

Co m m is si on er, 9 1 T.C. 3 2, 3 8- 40 (19 88 ); F irs t Sa v. & Loan Ass ’n v. Co m m is si on er, 4 0 T.C. 4 74 , 48 2 (1 96 3) . W eb st er’s II New Ri ve rs id e Uni ve rs ity Dict io na ry

30 3 (1 98 4) de fin es th e te rm “ co ns tru ct ” as “ [t]o p utto ge th er b y ass em bl in g p art s” or t o “ bu il d” . W eb st er’s II New Ri ve rs id e Uni ve rs ity Dict io na ry

20 7 d efi ne s the term

“bu il d” as

“ [t]o f orm by com bi ni ng m at eri al s o r pa rts ”. Whe n u se d i n the co nt ex t o f a h ou se orothe r bu il di ng , th e te rm s “ co ns tru ct ” an d/ or“bu il d” no rm al ly andco m m on ly co nn ot e a s eri es of a ct iv it ie s tha t i nc lu de , at the lea st , th e cre at io n o f a fo un da ti on , wall s, an d aroo f, as well as t he in it ia l i ns ta ll at io n o f th e v ari ou s s up po rt s y st em s th atm ak e th e h ou se or o th er b ui ld in g fu nc ti on al . Peti ti on er d idno ne of t he se th in gs so as t o m ak e th e h ou se habi tabl e, ei th er p hysic al ly or le ga ll y , as h is pr in ci pa l re si de nc e, an d h e h as othe rwis e fai le d t o e st ab li sh th athe “ co ns tru ct ed ” th e h ou se withi n the m ean in g o f se ct io n 3 6( c)(3 )(B) . It f ol lo ws tha t p et it io ne r’s al lo wab le cred itis co m pu te d wi threfe ren ce t o th e “purch as e p ric e” o f th e p ro pe rty as o f th e d at e h e to okti tl e to it , no t o n the da te th athe fir stoc cupi edth e h ou se as h is pri nc ip al res id en ce. Co ns eque nt ly, th e ad jus te d b as is inth e p ro pe rty is d et erm in edas o f Janu ary 23 , 20 09 . As ag reedto be twee n the parti es , th atam ou ntequa ls $3 1,3 03 .- 8 -

Tha t b ei ng so , res po nd en t’s d is al lo wan ce o f $1 ,02 7 o f th e cre di t cl ai m edon pe ti ti on er’s return i s s us ta in ed . To re fle ctth e fo reg oi ng , Deci si on wil l b e en te red fo r res po nd en t.