# PURSUANT TO INTERNAL REVENUE CODE SECTION 7463(b),THIS OPINION MAY NOT BE TREATED AS PRECEDENT FOR ANY OTHER CASE.T.C. Sum m ary Opi ni on 20 13 -9 9

UNITED STAT ES TAX COURT

RODRIGO AUGUSTO GAL VEZ AVILE Z AND D ALAW N HERNANDE Z, Pet it io ne rs v. COMM ISSI ONER OF INTERNAL REVENUE, Resp on de nt

Doc ke t No . 90 66 -1 2S
. Fil edDecem be r 9, 2 01 3.

Ro dr ig o Au gu st o Gal ve z Avi le z an d Dal awnHern an de z, pr o s es e. Mark H. Ho ward , for

res po nd en t.

SUMM ARY OPINION ARMEN, Sp eci al Trial 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 o f th e In te rn al Rev enue Co de ineffe ctwhen th e- 2 -

pe ti ti on was fi le d. Pur su an t t o s ect io n 7 46 3( b) , th e d eci si onto be en te redis no t 1
rev ie wab le by any

ot he 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 ot he r cas e. Res po nd en t d et erm in eda de fic ie nc y inpe ti ti on ers ’ 20 08 Fed eral in co m e ta x of $8 ,00 0 a ndanaccuracy-rela te d p en al ty of $1 ,60 0 p ur su an t t o s ect io n 6 66 2( a). The is su es forde ci si on are: (1 ) Whe th er p et it io ne rs are en ti tl edto th e fi rs t-t im e h om eb uyer cred it (FTHBC) . W e h ol d tha t the y are n ot ; an d (2 ) whe th er p et it io ne rs are l iabl e fo r th e acc ur acy-rela te d p en al ty und er se ct io n 6 66 2( a). W e h ol d t ha t the y are. Bac kg ro un d So m e o f th e fac ts ha ve be enst ip ul at ed , andth ey are s o fo un d. We in co rp or at e b y

refe ren ce the pa rti es ’ st ip ul at io n o f fac ts an d a cco m panyin g ex hi bi ts . Pet it io ne rs res id edinUtah at t he ti m e th atth e p et it io n was fil ed
. Fo r th e sake of c on ve ni en ce, we ref er t o p et it io ne r Ro dr ig o Au gu st o Gal ve z Avi le z as Mr. Gal ve z, an d t o p et it io ne r Dal awnHern an de z as Ms . Hern an de z. Unl es s o th erwi se in di cat ed , all subs eque ntsec ti on refe ren ces are t o t he 1 In te rn al Rev enue Co de (Co de ) in effe ctforth e y ear i n i ss ue , andall Ru le refe ren ces are t o t he Tax C ou rt Rul es of P ract ic e an d P ro cedur e.- 3 -

Befo re b ot h t he y ear i n i ss ue an d h er m arri ag e to Mr. Gal ve z, Ms . Hern an de z p ur ch as eda ho m e at12 27 So ut h R edwoo d Dri ve , Sal t Lak e Ci ty, Utah (So ut h R edwoo d Dri ve ho m e) an d u se d i t as he r pr im ary res id en ce. Pet it io ne rs m arri edinDecem be r 20 06 . At th atti m e Ms . Hern an de z st il l
own edth e So ut h R edwoo d Dri ve ho m e, an d p et it io ne rs bo th li ve d i n i t an d u se d i t as th ei r pr im ary res id en ce. InJan uary

20 08 pe ti ti on ers sep arat ed , andMr. Gal ve z m ov edou t o f th e So ut h R edwoo d Dri ve ho m e. As o f th e d at e o f tr ia l, Ms . Hern an de z co nt in ue d t o own th e So ut h R edwoo d Dri ve ho m e an d t o u se itas h er p rimary res id en ce. Inearl y 20 09 , whi le pe ti ti on ers were s ep arat edbu t s ti ll leg al ly m arri ed , Mr. Galv ez p ur ch as eda ho m e at58 33 So ut h Ut ah naDriv e, Mu rray, Utah (S ou th Utah naDriv e h om e). The pu rch as e o f th e So ut h Ut ah naDriv e h om e cl os edon Apr il 10 , 20 09 , andMr. Gal ve z m ov edinsh ortl y th erea fte r. Pet it io ne rs ret ai ne d J oe l Gu erre ro , a tra ns la ti ng sp eci al is t, t o p rep are ajoi nt Fed eral in co m e ta x re tu rnfor 20 08 . Mr. Gue rrer o a dv is edpe ti ti on ers th atth ey wou ldqu al ify for the FTHBC. Pet it io ne rs th encla im edan$8 ,00 0 F THBC fo r th e So ut h Ut ah naDriv e h om e o n the ir jo in t 2 00 8 re tu rnan d i nc lu de d aFo rm 54 05 , Fi rs t-Ti m e Hom eb uyer Cred it , with t he return.- 4 -

Mr. Gu erre ro si gn edpe ti ti on ers ’ joi nt20 08 return a s the pre pa rer, s ta ti ng th athe was s el f-em

pl oyed as a tr an sl at in g s pe ci al is t. Pet it io ne rs als o s ig ne d t he return andti m el y

fil edit
. Pet it io ne rs were g ran te d adi vo rce i n J un e 2 01 1 b y de cree of the Thi rd Ju di ci al Dis tri ctCo urt o f Sal t Lak e Co un ty, Utah
. InFeb ru ary 20 12 res po nd en t i ss ue d p et it io ne rs a no ti ce o f de fic ie nc y , de te rm in in g ade fic ie nc y

of $ 8,0 00 att rib ut ab le to th e d is al lo wan ce o f th e FTHBC cl ai m edby pet it io ne rs . In the no ti ce re sp on de ntals o d et erm in edth atpe ti ti on ers were l iabl e fo r th e acc ur acy-relate d p en al ty pur su an t t o s ect io n 6 66 2( a). Pet it io ne rs ti m el y

fil eda pe ti ti on forred et erm in at io n o f th e d efi ci en cy an d pe na lty . Dis cu ss io n I. Burd enof P ro of Inge ne ral , th e Co m

m is si on er’s d et erm in at io ns setforth ina no ti ce o f de fic ie nc y

are p res um edto be co rrec t, an d t he tax pa y er b ears th e b ur de n o f pr ov in g t ha t tho se de te rm in at io ns are i n e rro r. Ru le 14 2( a); W el chv. Hel ve rin g, 29 0 U.S. 1 11 , 11 5 (1 93 3) ; cf . sec . 74 91 (a), wh ic h m ay serve to sh iftth e b ur de n o f pr oo f to th e Co m

m is si on er i f th e co nd it io ns pre sc rib edby suc h s ect io n are sa ti sf ie d.- 5 -

Deduc ti on s an d c red it s ar e a m at te r of leg is la ti ve gra ce, an d t he tax pay er be ars th e b ur de n o f pr ov in g t ha t h e o r sh e is en ti tl edto an y de du ct io n o r cre di t cl ai m ed . Rul e 1 42 (a); Depu ty v. duPo nt , 30 8 U.S. 4 88 , 49 3 (1 94 0) ; New Co lo ni al Ice Co . v. Hel ve rin g, 2 92 U.S. 43 5, 4 40 (19 34 ). Pet it io ne rs di d n ot al le ge th atsec ti on74 91 ap pl ie s, n ordi d t he y in tro du ce the requi si te ev id en ce t o in vo ke th atsec ti on . Accor di ng ly, th e b ur de n o f pr oo f rem ai ns onpe ti ti on ers . II. Fi rs t-Ti m e Hom eb uyer Cred it 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. Sec ti on 36 (c)( 1) de fin es a “ fir st -ti m e h om eb uyer” as “ an y in di vi du al if
su chin di vi du al (an d i f m arri ed , su chin di vi du al ’s sp ou se ) ha d n o p res en t own ers hi p i nt eres t i n apri nc ip al res id en ce dur in g t he 3-year p eri oden di ng on th e da te of t he purch as e o f th e p rin ci pa l re si de nc e to whi chth is sec ti on ap pl ie s.” Se e al so Fo st er v . Comm is si on er, 1 38 T.C. 51 , 53 (20 12 ). Sect io n 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 ho m eb uyer fora 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 FTHBC o n t he tax pay er’s 2 00 8 t ax return. Mr. Gal ve z is co ns id eredto ha ve pu rch as edth e So ut h Ut ah naDriv e res id en ce o n Ap ril 10 , 20 09 , th e d at e th athe clo se d o n i ts pu rch as e. Co ns eque nt ly, pe ti ti on ers are el ig ib le as f irs t-t im e h om eb uyers o nl y if the y ha d n o- 6 -

pr es en t o wne rs hi p i nt eres t i n a ny pri nc ip al res id en ce b etweenApri l 1 0, 2 00 6, an d Apr il 10 , 20 09 . Ms . Hern an de z o wne d t he So ut h R edwoo d Dri ve res id en ce fr om be fo re the y ear i n i ss ue to th e d at e o f tr ia l an d u se d i t as he r pr im ary pr in ci pa l re si de nc e th ro ug ho utth atpe rio d. Bec au se pe ti ti on ers were s ti ll leg al ly m arri edat t he ti m e th atth e So ut h Utah naDriv e res id en ce was pu rch as edan d b ecau se ho m e o wne rs hi p b y on e sp ou se is att rib ut edto bo th sp ou se s p ur su an t t o s ect io n 3 6( c)(1 ), Ms . Hern an de z’s ho m e o wne rs hi p i s at tri bu te d t o M r. Galv ez. The refo re, Mr . Galv ez was no t a fir st -ti m e h om eb uyer with re sp ectto th e So ut h Ut ah naDriv e res id en ce wi th in th e m ean in g o f se ct io n 3 6( c). See Trig gi an i v . Uni te d S tate s, 1 12 Fed . Cl. 3 49 (20 13 ) (h ol di ng th atth e ta xp ay er was no t en ti tl edto th e FTHBC fo r a n ew res id en ce tha t he pu rch as edaft er en te rin g i nt o am ari ta l s et tl em en t ag reem en t b utbe fo re the di vo rce d ecre e was fin al be cau se of t he im pu ta ti on of h is ex -wif

e’s pr es en t own ers hi p i nt eres t i n a no th er p rin ci pa l re si de nc e atth e ti m e th atth e ta xp ay er pu rch as edhi s n ew res id en ce). Acco rd in gl y , pet it io ne rs are n oten ti tl edto th e FTHBC tha t the y

cla im edon th ei r joi nt20 08 return.- 7 -

III. Accu racy-Rel at edPen al ty Sect io n 6 66 2( a) an d (b )(1 ) an d (2 ) im po se s an accu racy-rela te d p en al ty equa l t o 2 0% o f th e am ountof a ny un de rp aym en t o f ta x t ha t i s due to th e ta xp ay er’s n eg li ge nc e o r di sr eg ardof rul es or r eg ul at io ns or t ha t i s at tri bu tabl e to an y subs tant ia l und ers ta te m en t o f in co m e ta x. The term “ ne gl ig en ce” i nc lu de s an y fai lu re t o m ak e a rea so nabl e at te m ptto co m pl y with t he tax laws , and“ di sr eg ard ” in cl ud es an y care le ss , reck le ss , or in te nt io na l d is reg ardof rul es or r eg ul at io ns . Sec. 6 66 2( c). By de fin it io n a ndas ap pl ic ab le he rei n, an un de rs ta te m en t i s the ex ces s o f th e ta x re qu ire d t o b e sh own on th e ta x re turnov er the tax actua ll y sh own on th e return. Se c. 66 62 (d )(2 )(A). In ge ne ral , an u nd ers ta te m en t o f in co m e ta x i s “ subs tant ia l” if i t ex ceed s the gre at er of $5 ,00 0 o r 10 % of t he tax requi redto be sh own onth e return. Se c. 66 62 (d )(1 )(A). W ith re sp ectto a ta xp ay er’s l iabi li ty for an y pe na lty , sec ti on 74 91 (c) p la ces on th e Co m

m is si on er the bu rd enof p ro du ct io n, the reb y requi rin g t he Co m m is si on er t o c om e fo rwardwith s uf fic ie ntev id en ce i nd ic at in g t ha t i t i s ap pr op ria te to im

po se th e p en al ty. Hig be e v . Comm is si on er, 1 16 T.C. 43 8, 4 46
- 44 7 (2 00 1) . Once t he Co m m is si on er m eet s h is bu rd enof p ro du ct io n, the tax pa y er- 8 -

m us t co m e fo rwardwith p ers ua si ve ev id en ce tha t the Co m mis si on er’s de te rm in at io n i s i nc orrect . See Ru le 14 2( a); W el chv. Hel ve rin g, 2 90 U.S. at 1 15 . Inth e in st an t ca se , res po nd en t’s n ot ic e o f de fic ie nc y in crea se d the to ta l t ax du e b y $8 ,00 0. Be cau se th is un de rs ta te m en t ex ceed s $ 5,0 00 , andfurth er b ecau se su chlat te r am ountis gre at er tha n 1 0% o f th e ta x re qu ire d t o b e sh own on pe ti ti on ers ’ return, re sp on de ntha s ca rri edhi s b ur de n o f pr oduc ti on . As a res ul t, pe ti ti on ers no w bea r th e b ur de n t o s ho w th atanex cep ti on to th e p en al ty is ap pl ic ab le . See Hig be e v . Comm is si on er, 1 16 T.C. at 4 46 -4 47 . Sect io n 6 66 4( c)(1 ) pr ov id es anex cep ti onto th e im po si ti onof t he accu racyrel at edpe na lty

with re sp ectto an y

po rti on of a n u nd erp aym en t i f th e ta xp ay er es tabl is he s tha t the re was reas on ab le cau se forsu chpo rti on an d t he tax pa y er ac te d in go odfai th with re sp ectto su chpo rti on . The d eci si on as t o wh ethe r th e ta xp ay er act edwith re as on ab le cau se an d i n g oo d fa ith i s m ad e o n acas e-b y -cas e b as is , ta ki ng in to acco un t the pe rti ne ntfact s an d c irc um st an ces , in cl ud in g t he tax pa y er’s kn owl ed ge , edu cat io n, an d e xp eri en ce, as well as t he tax pa y er’s rel ia nc e o n pr of es si on al advi ce. Tho m as v. Co m m is si on er, T.C. Mem o. 2 01 3- 60 ; s ee al so Neo na to lo gy Asso cs ., P.A. v. Co m m is si on er, 1 15 T.C. 43 , 99 (20 00 ) (p ro vi di ng a th ree- pr on g t es t t o e st ab li sh reas on ab le rel ia nc e o n p ro fes si on al advi ce), af f’d, 29 9 F.3 d 2 21 (3dCir . 20 02 ); s ec. 1 .66 64 -4 (b )(1 ), In co m e Tax Reg s. Gen eral ly, th e- 9 -

m os t i m po rtantfact oris th e ex te ntof t he tax pa y er’s eff ort t o a ss es s h is or h er pr op er t ax li ab il ity . Hum ph rey, Farri ng to n & McC la in , P.C. v. Co m m is si on er, T.C. Mem o. 2 01 3- 23 ; s ec. 1 .66 64 -4 (b )(1 ), In co m e Tax Reg s. Pet it io ne rs co nt en d t ha t the y ha d re as on ab le cau se an d a ct edingo odfai th by relying on advi ce fr om th ei r return p rep arer , Mr. Gue rrer o. Rel ianc e o n apro fes si on al tax advi se r’s advi ce m ay de m on strat e rea so nabl e cau se an d g oo d fa ith i f, taki ng in to acco un t al l the fact s an d c irc um st an ces , th e rel ianc e was reas on ab le an d t he tax pa y er ac te d i n g oo d fa ith. Se c. 1.6 66 4- 4( b) (1 ), (c)( 1) , Inc om e Tax Reg s. Re li an ce o n atax advi se r m ay be reas on ab le an d i n go odfai th if the tax pa y er es tabl is he s: (1) The a dv is er was a co m pe te nt pr of es si on al with s uf

fic ie ntex pe rti se to jus ti fy rel ia nc e; (2) th e ta xp ay er p ro vi de d
ne ces sa ry an d a ccu rat e in fo rm at io n t o t he advi se r; a nd(3) th e ta xp ay er ac tu al ly rel ie d i n g oo d fa ith o n t he advi se r’s jud gm en t. Neo na to lo gy Asso cs ., P.A. v. Co m m is si on er, 1 15 T.C. at 9 9. Pet it io ne rs ret ai ne d M r. Gue rrer o t o p rep are t he ir jo in t 2 00 8 re tu rn . The
reco rddo es no t i nd ic at e th atMr. Gu erre ro ha s an y tra in in g o r ex pe rti se intax pr ep arat io n. Infact , Mr. Gue rrer o s ig ne d p et it io ne rs ’ joi nt20 08 return s tati ng th at he was s el f-em

pl oyed as a tr an sl at in g s pe ci al is t ra th er tha n a s a c ert ifi edpubl ic
acco un tantor i n s om e o th er capa ci ty den ot in g p ro fes si on al tra in in g o r expe rti se in- 10 -

ta x m at te rs . Peti ti on ers di d n otpro du ce an y ev id en ce tha t M r. Gue rrer o h as an y cred en ti al s re ga rd in g t ax pre pa rat io n o r any tax ex pe rti se . There fo re, we can no t co nc lu de th atMr. Gu erre ro was aco m pe te ntpro fes si on al with s uf fic ie ntex pe rti se to jus ti fy rel ianc e. Acco rd in gl y , pet it io ne rs ha ve fai le d t o s at is fy th is requi rem en t to est ab li sh rel ianc e o n p ro fes si on al advi ce. Inad di ti on , pet it io ne rs ha ve no t o th erwi se de m on st rat edth atth ey act edwith
reas on ab le cau se an d i n g oo d fa ith. Th e rec or d d oe s n otrefl ectth atth ey rel ie d o n rel ev an t au th or it ie s o r co m pe te ntadvi se rs or o th erwi se m ad e a rea so nabl e eff ort t o as se ss th ei r pr op er t ax li ab il ity forth e y ear i n i ss ue . See Th om as v. Co m m is si on er, T.C. Mem o. 2 01 3- 60 ; s ee al so Neon at ol og y Ass oc s., P.A. v. Co m m is si on er, 1 15 T.C. at 9 8- 99 ; Hu m ph rey, Farri ng to n & McC la in , P.C. v. Co m m is si on er, T.C. Mem o. 2 01 3- 23 ; s ec. 1 .66 64 -4 (b )(1 ), In co m e Tax Reg s. Acco rd in gl y , we su st ai n re sp on de nt ’s det erm in at io n t ha t p et it io ne rs are l iabl e fo r th e acc ur acy-rela te d p en al ty und er s ect io n 6 66 2( a). Co nc lu si on W e h av e co ns id eredall of t he arg um en ts advanc edby pet it io ne rs an d, t o t he
ex te ntno t ex pr es sl y

ad dr es se d, we co nc lu de th atth os e arg um en ts are wi th ou t
m eri t, m oo t, o r irrel ev an t.- 11 -

To g iv e eff

ectto ou r di sp os it io n o f th e d is pu te d i ss ue s, Deci si on wil l b e en te redfor
res po nd en t.