The ‘Mi Casa no es Su Casa’ Case

http://www.ustaxcourt.gov/InOpHistoric/fosterDiv.TC.WPD.pdf

Taxpayers were denied a first time homebuyer credit because they had an ownership interest in a principal residence within 3 years of the date they acquired the new house. (This preceded the long term homeowner credit.) They sold their former residence on 6/6/07 and purchased their new residence on 7/28/09/ They listed the former residence for sale in February of 2006 and claimed that at that point they began to reside with Mrs. Foster’s parents ergo the former residence ceased being their principal residence as of that point.

Take aways:

• Whether or not a dwelling is the principal residence of a TP is relevant for a number of tax laws and the IRS considers all facts and circumstances to make these determinations. Whatever they determine, it will be 100% one way or the other. In other words, nothing is pro-rated – you either totally win or totally lose.

• In this case, between February 2006 and June of 2007: Mrs. Foster renewed her State-issued driver’s license which set forth the old house address; provided the former home address on their joint Federal income tax return; maintained utility services at the house; frequently stayed overnight and hosted family holiday gatherings at the house; kept all their personal belongings at the house; accessed the Internet at the house; and received bills and correspondence at the house. Additionally they did not pay rent or contribute toward household expenses at the alternate purported dwelling. All factors that weighed against them.