                          T.C. Summary Opinion 2012-77



                         UNITED STATES TAX COURT



                    DONNA I. COLCA, Petitioner v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent



      Docket No. 1680-11S.                         Filed August 6, 2012.



      Donna I. Colca, pro se.

      Cassidy B. Collins and Elaine Tamiko Fuller, for respondent.



                                SUMMARY OPINION


      SWIFT, Judge: This case was heard pursuant to the provisions of section

7463 of the Internal Revenue Code in effect when the petition was filed.1 Pursuant



      1
       Unless otherwise indicated, all section references are to the Internal Revenue
Code in effect for the year in issue, and all Rule references are to the Tax Court
Rules of Practice and Procedure.
                                          -2-

to section 7463(b), the decision to be entered is not reviewable by any other court,

and this opinion shall not be treated as precedent for any other case.

      Respondent determined a deficiency of $8,000 in petitioner’s 2009 Federal

income tax. The issue for determination is whether petitioner is entitled to an

$8,000 first-time homebuyer credit (FTHBC).

                                      Background

      This case has been fully stipulated under Rule 122, and the stipulated facts

are so found.

      At the time of filing the petition, petitioner resided in California.

      In 1954 petitioner’s parents purchased a residence on Flynn Street in La

Puente, California (Flynn residence). In the 1970s petitioner’s parents paid off the

mortgage on the Flynn residence.

      In 1993 petitioner moved back in with her parents, and she has used the Flynn

residence as her principal residence through the time of trial.

      On September 30, 1999, petitioner’s parents created the Donald G. Van

Sickle and Margaret F. Van Sickle Revocable Living Trust (family trust).

Petitioner’s parents transferred cash and the Flynn residence to the family trust.

      During their lives petitioner’s parents were the cotrustees of the family trust.

Petitioner and her brother were the successor cotrustees. The beneficiaries of the
                                         -3-

family trust included petitioner’s brother; the grandchildren of petitioner’s parents

who, when the trust became irrevocable (discussed infra), consisted of six

grandchildren; and petitioner.

      On May 27, 2008, petitioner’s mother died. Six weeks later on July 18,

2008, petitioner’s father died. Upon petitioner’s father’s death the family trust

became irrevocable and both petitioner and her brother received a vested one-third

ownership interest in the family trust property. The six grandchildren shared equally

in the remaining vested one-third ownership interest.

      On November 18, 2008, an affidavit regarding the death of petitioner’s

parents was recorded in Los Angeles, California, and petitioner and her brother

accepted appointment as trustees of the family trust.

      In February 2009 all beneficiaries of the family trust signed and executed a

beneficiary agreement relating to the family trust and to the estates of their deceased

parents (or grandparents). In accordance with the terms of the beneficiary

agreement the trust property, which included the Flynn residence and $183,837

cash, was to be distributed in the following manner: petitioner and her brother each

received a 50% ownership interest in the Flynn residence and $7,812
                                         -4-

in cash; the six grandchildren each received $27,969 in cash; and $399 was reserved

for costs.2

       On March 7, 2009, in order to purchase her brother’s separate 50%

ownership interest in the Flynn residence, petitioner gave her brother a $160,000

promissory note.

       On June 1, 2009, petitioner paid her brother $156,873 on the promissory

note, and a deed was recorded signed by her brother transferring his 50% ownership

interest in the Flynn residence to her. The effective date of the sale of the Flynn

residence was stated as May 21, 2009.

       On her 2009 timely filed Federal income tax return petitioner claimed an

$8,000 FTHBC relating to her purchase of her brother’s 50% ownership interest in

the Flynn residence.

       On October 19, 2010, respondent issued a statutory notice of deficiency

disallowing petitioner’s claimed FTHBC.




       2
       Nothing in the record indicates when actual distribution of the family trust
property occurred. However, in this case, the date of actual distribution is not
necessary in determining when petitioner acquired an ownership interest in property.
                                         -5-

                                      Discussion

      Section 36(a) allows a credit to a first-time homebuyer of a principal

residence. A first-time homebuyer is any individual who has had no present

ownership interest in a principal residence for three years before the purchase of the

residence in question. Sec. 36(c)(1); Foster v. Commissioner, 138 T.C. 51, 53

(2012). Thus, petitioner is eligible as a first-time homebuyer only if she had no

present ownership interest in a principal residence between May 22, 2006, and May

21, 2009.

      Petitioner argues that her 50% ownership interest in the Flynn residence that

was acquired by the vesting of her interest in the family trust property and by the

signing and execution of the beneficiary agreement is immaterial because she is only

claiming a FTHBC with respect to the 50% ownership interest in the Flynn

residence she purchased from her brother. We disagree.

      Any present ownership interest in a principal residence during the stated

three-year period disqualifies a taxpayer from claiming a FTHBC. See sec.

36(c)(1); see also Foster v. Commissioner, 138 T.C. at 53; Drain v. Commissioner,

T.C. Memo. 2011-242. Petitioner acknowledges that under California law when the

family trust became irrevocable she acquired a vested one-third present ownership

interest in all of the trust property, including the Flynn residence, and when the
                                        -6-

beneficiary agreement was signed and executed she acquired a specific 50% present

ownership interest in the Flynn residence. These present ownership interests

petitioner held before her purchase of her brother’s separate 50% ownership interest

disqualify her from receiving the claimed $8,000 FTHBC. To hold otherwise would

severely dilute the requirement that a taxpayer have no present ownership interest in

a principal residence during the three-year period before the purchase in question.

      We sustain respondent’s disallowance of the $8,000 FTHBC claimed on

petitioner’s 2009 Federal income tax return.

      To reflect the foregoing,


                                                     Decision will be entered

                                               for respondent.
