TAX COURT OPINION

Case: Laura L. Truman
Docket Number: 16934-13
Judge: Holmes
Opinion Type: bench
Filed: 10/15/2014
Pages: 6

UNITED STATES TAX COURT WASHINGTON, DC 20217 LAURA L. TRUMAN, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent ) ) ) ) ) ) ) ) ) O R D E R Docket No. 16934-13. Pursuant to Rule 152(b), Tax Court Rules of Practice and Procedure, it is ORDERED that the Clerk of the Court shall transmit herewith the the trial to petitioner and to respondent a copy of transcript of Holmes at Phoenix, AZ, on September 23, 2014 containing his oral findings of which the case was heard. in the above case before Judge Mark V. the pages of fact and opinion rendered at the trial session at In accordance with the oral findings of fact and opinion, an appropriate decision will be entered. (Signed) Mark V. Holmes Judge Dated: Washington, D.C. October 15, 2014 8BhED OCT 29 2014 Capital Reporting Company 1 2 3 4 5 6 7 8 9 Bench Opinion by Judge Mark V. Holmes September 23, 2014 Laura L. Truman v. Commissioner Docket No. 16934-13 THE COURT: In the case of Laura Truman v. Commissioner, Docket No. 16934-13, the Court has decided to render oral findings of fact and opinion and the following is the Court's oral findings of fact and opinion. This bench opinion is made 10 pursuant to the authority granted by section 7459(b) 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 of the Internal Revenue Code of 1987, as amended, and I Rule 152 of the Tax Court Rules of Practice and procedure. This case was filed by Laura Truman, a librarian here in Phoenix, ¿he e a resident of whoan5 Arizona when she filed for the petition. She reached a stipulation with the IRS and together with her testimony it constitutes the record of this case. Let me begin this in general with remarks about Ms. Truman. I found her testimony to be entirely credible. She is very serious about her taxes and very serious about her responsibilities. She took the first-time homebuyer's credit that is at issue here entirely in good faith. She was very forthright in her testimony about what was clearly a 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 4 1 gut-wrenchingly difficult time in her life; a brief 2 marriage to one Mark Truman. 3 4 5 6 Her case comes from this very difficult time in her life and the facts are very easy to summarize. In July of 2006 Mr. Truman bought a property in Albuquerque e lived before he even 7 met Mrs. Truman. In October of 2007 they did meet 8 9 10 11 12 and his name was added to the lease of her apartment here in Arizona. He began living there most of the I week but still traveled to Albuquerque for business. In November of 2008 Mrs. Truman married her former husband, Mr. Truman. In October of 2009 he 13 moved back to Albuquerque full-time. In 2010, trying 14 15 16 to put this difficulty behind her, Mrs. Truman put in an offer for a property on North 22nd Street here in Phoenix and that offer was accepted. At this same 17 month Mr. Truman filed a petition for divorce. The 18 19 next month, February of 2010, Mr. and Mrs. Truman finished their divorce paperwork and began the 60 day 20 waiting period for divorce required here in Arizona. 21 22 23 24 On March 25th, as that 60 day period was nearing its end, Mrs. Truman signed the papers to buy the 22nd Street property. It's clear, I believe her completely, that Mr. Truman had no interest 25 whatsoever in the 22nd Street property. She had no 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company interest in his Albuquerque home that he had acquired before their marriage. But it was only on April 21, 2010 that the divorce became final in the State of Arizona under Arizona law statute section 25-325, 5 A. On these facts, which are really undisputed, Mrs. Truman says that she's eligible for the first-time homebuyer credit because she never had any interest in the Albuquerque property. She paid for the 22nd Avenue property herself, which she did. Her former husband never contributed any funds to that and never had any part of the buying of the home and his name was never on the title of the house. It was her first home, the first time she had ever bought. She clearly takes pride in saving that money on her salary and finding a good place to live and negotiating a good deal. No doubt she is the kind of person any sensible first-time homebuyer credit is 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 meant to benefit. She cried about that. The purpose 20 21 22 23 24 25 of the law was to benefit people precisely like her. Unfortunately, we have to go to the actual word of the code, and the words of the code don't really express this intent. Section 36(c)(1) of the Code says "the term first-time homebuyer means any individual if such individual", and here's the key 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 6 1 2 3 4 line, (and if married such individual's spouse) 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 to 5 which this section applies." 6 7 8 9 10 11 So what I have to do is determine what three year period to look at. That three year period begins, in Mrs. Truman's case, on March 25°¹, or thereabouts, in 2010, when she attended closing for her new home. So I look back to late March of 2007 and at that point the man that she was going to be 12 married to briefly, the man she hadn't even met at 13 14 15 that point, owned a home in Albuquerque that constituted his principal residence. It's a strange result here because they 16 weren't married at the time the disqualifying event 17 18 19 occurred, namely the purchase by Mr. Truman of his Albuquerque home. But the Code actually says that for that three year period neither part of the 20 married couple can own a home and then claim the 21 22 23 24 25 first-time homebuyer credit. This is obviously a very harsh result for Mrs. Truman but it's what is in the Code unfortunately. I'm heartened that the IRS conceded the penalty in this issue. It's clear that Mrs. Truman 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 7 was behaving entirely reasonably and in good faith according to the best advice that she could get and the best reading of the instructions that she had. I sincerely hope that the IRS will work with her, as she asked, in coming up with an installment agreement or other payment arrangement for this tax. But unfortunately I have to, because of the language of this parenthetical expression in the Code, find against her. Decision will be rendered partly in favor of the IRS and partly in favor of Mrs. Truman because of the concession of the penalty issue. This concludes the Court's Oral Findings of Fact and Opinion in this case. (Whereupon, at 9:08 a.m., the above- entitled matter was concluded.) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 866.488.DEPO www.CapitalReportingCompany.com