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Purchasing Ex-Wife's Home Before Divorce Precluded First-Time Homebuyer Credit
(Parker's Federal Tax Bulletin: September 21, 2013)

The taxpayer could have qualified as a first-time homebuyer if he had waited to purchase his soon-to-be-ex-wife's house after their divorce was final; the settlement agreement the couple signed before the divorce was not recognized by the IRS or the court as evidence of a final divorce. Triggiani v. U.S., 2013 PTC 264 (Fed. Cl. 8/16/13).

Alfonso Triggiani bought a home July 20, 2009, and filed IRS Form 5405, First-time Homebuyer Credit and Repayment of the Credit, in that tax year to receive the $8,000 tax credit for first-time homebuyers. The home belonged to the wife from whom he was divorced under a final divorce decree in September of 2009. On July 9, 2009, Alfonso and his wife executed and signed a marital settlement agreement to memorialize their decisions regarding issues such as division of property and spousal support.

OBSERVATION: The first-time homebuyer credit (FTHBC) generally was available only for taxpayers who purchased a principal residence during 2008, 2009, or 2010.

The IRS disallowed the claim for the $8,000 credit. Under Code Sec. 36(c)(3)(A), the credit is not allowed for a home acquired from a person related to the person acquiring the home. Thus, the IRS explained, Alfonso did not qualify for the credit because his ex-wife had owned their home as a principal residence, and this interest was imputed to him.

Alfonso argued that the July 9 marital settlement agreement established the date of the divorce. The IRS argued that Alfonso was not entitled to the credit because his divorce decree was not final until September, well after he purchased his home. Alfonso appealed to the Court of Federal Claims.

The benefit for first-time homebuyers was a tax credit under Code Sec. 36 of 10 percent of the purchase price of a principal residence, up to $8000. Code Sec. 36 defines first-time homebuyer of a principal residence as an individual if such individual (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 which Code Sec. 36 applies. The IRS said Alfonso did not qualify as a first-time homebuyer under the statute because he was married when he bought the new residence for which he sought the credit. His spouse had a present ownership interest in a principal residence during the three-year period before the purchase.

The Court of Federal Claims held that Alfonso was not entitled to the credit. The court noted that Alfonso could have qualified as a first-time homebuyer only by purchasing his new home after his divorce was final. The court concluded that the settlement agreement was not evidence of a final divorce. Thus, Alfonso was legally married when he purchased the property at issue. A beneficial interest in the home was imputed to him, the court said, and thus he did not qualify as a first-time homebuyer.

For a discussion of taxpayers eligible for the first-time homebuyer credit, see Parker Tax ¶102,705.

Parker Tax Publishing Staff Writers


Disclaimer: This publication does not, and is not intended to, provide legal, tax or accounting advice, and readers should consult their tax advisors concerning the application of tax laws to their particular situations. This analysis is not tax advice and is not intended or written to be used, and cannot be used, for purposes of avoiding tax penalties that may be imposed on any taxpayer. The information contained herein is general in nature and based on authorities that are subject to change. Parker Tax Publishing guarantees neither the accuracy nor completeness of any information and is not responsible for any errors or omissions, or for results obtained by others as a result of reliance upon such information. Parker Tax Publishing assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect information contained herein.

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