TAX COURT OPINION

Case: Marsha V. Dennard
Docket Number: 24213-11S
Judge: Carluzzo
Opinion Type: bench
Filed: 06/04/2013
Pages: 7

UNITED STATES TAX COURT WASHINGTON, D.C. 20217 MARSHA V. DENNARD, Petitioner, v. COMMISSIONER OF INTERNAL REVENUE, Respondent. ) ) ) ) ) Docket No. 24213-11S ) ) ) ) ORDE R Pursuant to the determination of the Court as set forth in its bench opinion rendered on April 11, 2013, it is ORDERED that the Clerk of the Court shall transmit herewith to petitioner and to respondent a copy of the pages of the transcript of the trial in the above case before Special Trial Judge Lewis R. Carluzzo at Miami, Florida, containing his oral findings of fact and opinion rendered at the trial session at which the case was heard. In accordance with the oral findings of fact and opinion, decision will be entered for respondent with respect to the deficiency and for petitioner with respect to the section 6662(a) accuracy-related penalty. (Signed) Lewis R. Carluzzo Special Trial Judge Dated: Washington, D.C. June 4, 2013 SERVED JUN - 7 2013 Capital Reporting Company 3 1 Bench Opinion by Special Trial Judge Lewis Carluzzo I 2 April 11, 2013 3 Marsha V. Dennard v. Commissioner 4 5 6 7 8 9 10 11 Docket No. 24213-11S THE COURT: The Court has decided to render oral findings of fact and opinion in this case and the following represents the Court's oral findings of fact and opinion (bench opinion). Section references made in this bench opinion are to the Internal Revenue Code of 1986, as amended, in effect for the relevant period, and Rule references are to the Tax 12 Court Rules of Practice and Procedure. This bench 13 14 15 16 17 18 19 20 21 22 23 24 25 opinion is made pursuant to the authority granted by section 7459(b) and Rule 152. This proceeding for the redetermination of a deficiency is a small tax case subject to the provisions of section 7463 and Rules 170 through 175. Pursuant to section 7463(b), the decision entered in this case shall not be treated as precedent for any other case. Marsha V. Dennard appeared as a self- represented litigant. Brandon S. Cline appeared on behalf of respondent. In a notice of deficiency dated August 26, 2011 (notice), respondent determined a $7,500 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 4 1 2 3 4 5 deficiency in petitioner's 2008 Federal income tax and imposed a $1,500 section 6662(a) accuracy-related penalty. The issues for decision are: (1) whether petitioner is entitled to a first-time homebuyer credit allowed by section 36 (credit); and (2) 6 whether petitioner is liable for a section 6662 (a) 7 8 9 10 11 12 accuracy-related penalty. Some of the facts have been stipulated and are so found. At the time the petition was filed, petitioner resided in Florida. During 2009, petitioner was a tenant in an apartment complex located at 179 SE 3rd Street, 13 Deerfield Beach, Florida (apartment complex). The 14 15 16 17 18 owners of the apartment complex intended to convert the building from apartments to condominiums and on January 26, 2009, petitioner signed a contract for the sale for the apartment unit she was then occupying as a tenant (3"4 Street property). For 19 whatever reasons, the owners of the apartment complex 20 21 22 decided to sell the entire building rather than apartment unit by apartment unit, and petitioner never did acquire an ownership interest in the 3rd 23 Street property. Petitioner did not otherwise 24 25 purchase a principle residence during 2008 or 2009. Petitioner's timely 2008 Federal income tax 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 5 return was electronically filed on March 9, 2009 (return). The return includes a Form 5405, First- Time Homebuyer Credit, on which petitioner claimed a $7,500 credit attributable to the 3'd Street property. See section 36(g) (which allows the taxpayer to claim an otherwise allowable credit as though the principle residence was purchased on December 31, 2008). The credit was refunded to her in due course and pursuant to section 36(f) (which requires the credit to be recaptured dollar-for-dollar over a specified period) in each of the years 2010, 2011 and 2012, petitioner reported and paid an increased Federal income tax liability of $500. In the notice, respondent disallowed the credit upon the ground that petitioner "may not meet the requirement[s]" of section 36, and as discussed in the following paragraph, the evidence in this case shows that she did not. Subject to a variety of conditions and limitations that we need not discuss here, section 36 allows a credit to a taxpayer computed with reference to the purchase price of a principle residence in the 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 United States "on or after April 9, 2008, and before 24 25 December 1, 2009." The term "purchase" as used in section 36 means "any acquisition", subject to 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 6 1 2 3 4 5 6 7 8 9 10 11 12 13 14 certain restrictions not relevant here. Pursuant to section 36(g), a taxpayer may claim a credit on the taxpayer's Federal income tax return for the calendar year preceding the year of purchase of the principal residence, and in this case the recapture provisions of section 36(f) are not waived. According to respondent, because petitioner never actually acquired title to the 3 4 Street property, it was not "purchased" within the meaning of section 36, and she is not entitled to the credit here in dispute. See section 36(h). Petitioner agrees that she did not purchase the 3'd Street property or any other property that would fit within the definition of a principle residence within the 15 meaning of section 36 during 2008 or 2009. She 16 17 18 19 20 21 22 23 24 25 argues, however, that she is entitled to the credit because she entered into a contract for the purchase of the 3 d Street property within the period provided by the statute. Petitioner misreads the statute. In order to be entitled to the credit petitioner would have had to actually taken title to the 3"d Street property by "purchase" within the meaning of section 36. That did not happen during the relevant statutory period and her failure otherwise to purchase a principal 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 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 residence in 2008 or 2009 precludes her entitlement to the credit. Respondent's disallowance of the credit is sustained. Sustaining the disallowance of the credit results in a deficiency as determined in the notice even though petitioner has, in effect, repaid a portion of that deficiency in years following the year in issue. This result seems less than fair, even if compelled by the definition of a deficiency as found in section 6211. That definition simply does not allow for the recapture of a section 36 credit to be taken into account for the year in which the credit is disallowed. At trial respondent's counsel observed that to the extent the credit is not allowable, petitioner must pursue traditional refund procedures in order to recover overpaid Federal income taxes for the year 2010, 2011 and 2012 as a result of the recapture provisions of section 36(f). We expect that respondent will take such actions as necessary to ensure that petitioner's claims for refund, if made, will be processed consistent with the disallowance of the credit. According to the notice, petitioner is liable for a section 6662(a) accuracy-related penalty upon various grounds, including upon the ground that 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 8 1 2 3 4 5 6 7 8 9 10 11 12 13 14 the underpayment of tax required to be shown on the return is a substantial understatement of income tax. See section 6662(a) and (b). If a taxpayer acts in good faith and there is reasonable cause for the underpayment, then the section. 6662(a) accuracy- related penalty is not applicable. See section 6664 (c); Higbee v. Commissioner, 116 T.C. 438, 446- 447 (2001). We need not consider whether there is an "underpayment", as that term is used in section 6662(a), in the tax required to be shown on petitioner's return. See section 6664 (a). Even if there is, we find that she acted in good faith and had a reasonable cause with respect to it. 15 Consequently, she is not liable for a section 6662(a) accuracy-related penalty. To reflect the foregoing, decision will be enter for respondent with respect to the deficiency and for petitioner with respect to the imposition of the section 6662(a) accuracy-related penalty. This concludes the Court's bench opinion in this ·case. (Whereupon, at 9:21 a.m., the above entitled matter was concluded.) 16 17 18 19 20 21 22 23 24 25 866.488.DEPO www.CapitalReportingCompany.com