Academic journal article Journal of Accountancy

Inherited Home Triggers Denial of First-Time Homebuyer Credit: A Home in Which a Taxpayer Inherited an Ownership Interest Was His Principal Residence, Even Though He Lived There Only a Few Months, the Tax Court Holds

Academic journal article Journal of Accountancy

Inherited Home Triggers Denial of First-Time Homebuyer Credit: A Home in Which a Taxpayer Inherited an Ownership Interest Was His Principal Residence, Even Though He Lived There Only a Few Months, the Tax Court Holds

Article excerpt

The Tax Court held that a home inherited by a taxpayer disqualified him from a first-time homebuyer credit for a new residence. The fact that the taxpayer did not intend for the inherited property to be his permanent residence was not controlling because he had no other residence when he lived there.

Facts: In April 2006, Alexander Goralski, a CPA, moved out of his New York City apartment and into the home of his late mother in Elmsford, N.Y., to assist his sister with her grieving and recovery from the death of their mother. Goralski slept at the home and used it as his home address for IRS filings and other mailings. In February 2007, their mother's estate deeded the Elmsford home to Goralski and his sister as tenants-in-common.

By May 2007, Goralski moved into an apartment in Yonkers, N.Y., and in April 2008 purchased a condominium in Yonkers and moved there.. He and his wife claimed a first-time homebuyer credit on their joint 2008 return in connection with the Yonkers condominium. The IRS disallowed the credit and determined a deficiency and accuracy-related penalty. Goralski petitioned the Tax Court for a redetermination.

Issues: For years in which the first-time homebuyer credit was available, a taxpayer and, if married, the individual's spouse could not have held a present ownership interest in another principal residence during the three-year period ending on the date of purchase of the qualifying principal residence (Sec. 36(c)(1)). Sec. 36(c)(2) provides that "principal residence" has the same meaning as in Sec. …

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