                            T.C. Summary Opinion 2012-115



                            UNITED STATES TAX COURT



                      JAMES TIMOTHY HARRIS AND
                 LATONYA MECHAEL HARRIS, Petitioners v.
              COMMISSIONER OF INTERNAL REVENUE, Respondent



      Docket No. 10104-11S.                           Filed November 26, 2012.



      James Timothy Harris and LaTonya Mechael Harris, pro sese.

      Amber B. Martin, for respondent.



                                 SUMMARY OPINION


      WELLS, 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, section references are to the Internal Revenue
                                                                           (continued...)
                                         -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. The issue we

must decide is whether petitioners are entitled to the first-time homebuyer credit

(FTHBC) pursuant to section 36.

                                     Background

       Some of the facts and certain exhibits have been stipulated. The parties’

stipulations of facts are incorporated in this opinion by reference and are found

accordingly. Petitioners are husband and wife who resided in Mississippi at the

time they filed their petition.

       During 2000, petitioner husband moved into a St. Louis, Missouri, residence

(St. Louis property) owned by Catherine Barton. On August 10, 2000, Ms. Barton

executed a quitclaim deed in favor of petitioner husband and herself for the St. Louis

property in connection with a refinancing of the mortgage. From 2000 to 2008 Ms.

Barton maintained her principal residence at the St. Louis property. Petitioner

husband and Ms. Barton had a son, K.J.H., who also lived at the St. Louis property

as his principal residence from his birth to 2008.



       1
       (...continued)
Code of 1986, as amended, and Rule references are to the Tax Court Rules of
Practice and Procedure.
                                         -3-

      In either January or February 2001, petitioner husband moved to Gadsden,

Alabama, because of the requirements of his work. In May 2001, petitioner

husband married Ms. Barton, who continued to reside in Missouri at the St. Louis

property.

      During 2004, petitioner husband moved to Memphis, Tennessee, because of

his work for the Job Corps program, and as of July 2004 he began to reside in

Southaven, Mississippi (Southaven residence). At the time of petitioner husband’s

move, he and Ms. Barton were already separated. After his move to Memphis,

petitioner husband periodically returned to St. Louis to visit K.J.H. and provided

financial support for his family. However, petitioner husband neither provided Ms.

Barton with financial support to maintain or repair the St. Louis property nor

received mail at the St. Louis property. On April 29, 2005, petitioner husband

applied for a driver’s license from the State of Mississippi listing the Southaven

residence as his home address.

      Petitioner husband and Ms. Barton jointly filed Forms 1040, U.S. Individual

Income Tax Return, for their 2005 and 2006 tax years. For their 2005 and 2006 tax

years, petitioner husband and Ms. Barton’s joint returns listed the St. Louis property

as their home address and showed deductions for home mortgage interest and real

estate taxes associated with the St. Louis property. Petitioner husband and Ms.
                                          -4-

Barton claimed a refund due to overpayment of taxes for their 2005 and 2006 tax

years. Petitioner husband did not himself receive any refunded taxes, and the record

does not disclose whether Ms. Barton received any refunded taxes. During 2005,

petitioner husband received a Form W-2, Wage and Tax Statement, listing the

Southaven residence as his address. During 2006, petitioner husband received a

Form W-2 listing the St. Louis property as his address.

      Petitioner husband and Ms. Barton signed the Final Decree of Divorce and

Property Settlement Agreement (divorce decree) on February 16, 2007. The

Chancery Court of DeSoto County, Mississippi, filed the divorce decree on May 23,

2007. The divorce decree granted ownership of the St. Louis property to Ms.

Barton. However, record title to the St. Louis property continues in the names of

both Ms. Barton and petitioner husband.

      Petitioners married on August 25, 2007. On April 18, 2008, petitioner wife

purchased a residence in Olive Branch, Mississippi (Olive Branch property).

Petitioner wife did not own any residence at any time from April 2005 until the

purchase of the Olive Branch property. After the purchase, petitioners moved into

and continue to live at the Olive Branch property. For their 2008 tax year,

petitioners filed a Form 1040 with the filing status married filing jointly. On their

2008 Form 1040, petitioners claimed a section 36 credit of $7,500.
                                          -5-

                                      Discussion

      Generally, the Commissioner’s determination of a deficiency is presumed

correct, and the taxpayer has the burden of proving it incorrect. Rule 142(a); Welch

v. Helvering, 290 U.S. 111, 115 (1933). Section 7491(a)(1) provides an exception

that shifts the burden of proof to the Commissioner as to any factual issue relevant

to a taxpayer’s liability for tax if: (1) the taxpayer introduces credible evidence with

respect to that issue; and (2) the taxpayer satisfies certain other conditions, including

substantiation of any item and cooperation with the Government’s requests for

witnesses, documents, other information, and meetings. Sec. 7491(a)(2); see also

Rule 142(a)(2). The taxpayer bears the burden of proving that the taxpayer has met

the requirements of section 7491(a). Rolfs v. Commissioner, 135 T.C. 471, 483

(2010), aff’d, 668 F.3d 888 (7th Cir. 2012). Because we decide the factual issues

in the instant case on the preponderance of the evidence, the allocation of the burden

of proof is immaterial. See Knudsen v. Commissioner, 131 T.C. 185, 189 (2008).

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

residence. A first-time homebuyer is “any individual if such individual (and if

married, such individual’s spouse) had no present ownership interest in a principal
                                         -6-

residence during the 3-year period ending on the date of the purchase of the

principal residence to which this section applies.” Sec. 36(c)(1).

      Petitioners are eligible as first-time homebuyers if neither petitioner wife nor

petitioner husband had an ownership interest in a principal residence after April 17,

2005, and before April 18, 2008. See Foster v. Commissioner, 138 T.C. 51, 52-53

(2012). For purposes of the FTHBC, section 36(c)(2) provides that the term

“principal residence” has the same meaning as in section 121. Whether a taxpayer

uses a property as his or her principal residence depends upon all the facts and

circumstances. See sec. 1.121-1(b)(2), Income Tax Regs. Ordinarily, the

taxpayer’s principal residence is the property the taxpayer uses during most of the

year. See id. Section 1.121-1(b)(2), Income Tax Regs., provides:

             (2) Principal residence. * * * In addition to the taxpayer’s use of
      the property, relevant factors in determining a taxpayer’s principal
      residence, include, but are not limited to--

             (i) The taxpayer’s place of employment;

          (ii) The principal place of abode of the taxpayer’s family
      members;

             (iii) The address listed on the taxpayer’s federal and state tax
      returns, driver’s license, automobile registration, and voter registration
      card;

            (iv) The taxpayer’s mailing address for bills and
      correspondence;
                                         -7-

             (v) The location of the taxpayer’s banks; and

            (vi) The location of religious organizations and recreational
      clubs with which the taxpayer is affiliated.

      Respondent contends that petitioner husband was not a first-time homebuyer

because, after April 17, 2005, petitioner husband held an ownership interest in the

St. Louis property and used the St. Louis property as his principal residence.2

Petitioners do not dispute that petitioner husband had record title to the St. Louis

property in his joint name with Ms. Barton at least until his divorce from Ms. Barton

in 2007, but contend that the St. Louis property ceased to be his principal residence

when he moved to the Southaven residence, which was before April 18, 2005.

      In 2004, petitioner husband moved to the Memphis, Tennessee, area so that

he could continue his work for the Job Corps program in Memphis. As of July

2004, petitioner husband began to reside in the Memphis suburb of Southaven,




      2
        We note that sec. 36(c)(6) expands the scope of the FTHBC by making it
available to individuals who have owned and lived in the same residence for at least
five consecutive years during the eight years before purchasing a new principal
residence. According to respondent, it is likely that petitioner husband would have
qualified for the FTHBC under sec. 36(c)(6). However, para. (6) was not enacted
until 2009 and does not apply for the 2008 tax year. See Worker, Homeownership,
and Business Assistance Act of 2009, Pub. L. No. 111-92, sec. 11(b), 123 Stat. at
2989. Consequently, petitioners cannot avail themselves of sec. 36(c)(6).
                                         -8-

Mississippi, and no longer resided at the St. Louis property. Petitioner husband

only periodically returned to St. Louis, primarily to visit his son, K.J.H. and not Ms.

Barton, from whom petitioner husband separated when he moved and whom he

ultimately divorced in 2007. Petitioner husband provided Ms. Barton with financial

support for K.J.H. but not for the upkeep of the St. Louis property.   Additionally,

after moving to the Memphis area, petitioner husband ceased to receive mail at the

St. Louis property and listed his address as the Southaven residence on his

application for a Mississippi driver’s license. Consequently, petitioner husband

worked in Memphis, limited his family involvement in St. Louis only to interactions

with K.J.H., changed his mailing address from the St. Louis property to the

Southaven residence, and received a Mississippi driver’s license listing his address

as the Southaven residence. The evidence, which includes his credible testimony,

indicates that petitioner husband stopped residing at the St. Louis property when he

moved to the Southaven residence during 2004. Accordingly, we conclude that the

St. Louis property ceased to be petitioner husband’s principal residence before April

18, 2005.

      Respondent contends that petitioner husband’s Forms 1040 for his 2005 and

2006 tax years prove that the St. Louis property was his principal residence during
                                         -9-

those years. Respondent points to the fact that petitioner husband and Ms. Barton

jointly filed Forms 1040 for their 2005 and 2006 tax years, and on both Forms 1040

they listed the St. Louis property as their home address and deducted home

mortgage interest3 and real estate taxes associated with the St. Louis property.

However, at trial petitioner husband testified that Ms. Barton prepared the Forms

1040 and that he signed them without questioning her because he wanted “to get out

from under that entire umbrella with as little issue of problems as possible.” We

accept petitioner husband’s testimony as credible. It is consistent with other facts

that persuade us that the St. Louis property was not his actual residence when he

signed the return. Petitioner husband and Ms. Barton did, in fact, face marital

problems, as evidenced by their separation in 2004 and ultimate divorce in 2007.

Furthermore, although petitioner husband and Ms. Barton claimed a refund due to

overpayment of taxes for their 2005 and 2006 tax years, he did not receive any of


      3
        Respondent appears to be arguing that petitioners’ position that they qualify
for the FTHBC is inconsistent with petitioner husband and Ms. Barton’s position on
their 2005 and 2006 joint returns that the St. Louis property was treated as a
principal residence for purposes of the interest deduction under sec. 163(h).
Respondent has not convinced us that those positions are necessarily inconsistent.
In particular, respondent has failed to address the effect of the cross- reference in
sec. 163(h)(4)(A)(i)(I) to sec. 121, inasmuch as sec. 121(d)(1) might suggest that
Ms. Barton was entitled to claim the St. Louis property as her principal residence
with regard to her sole use of that property for purposes of claiming an interest
deduction under sec. 163(h) on her joint return with petitioner husband.
                                          - 10 -

the refund payment, limiting his personal benefit from the deductions. Additionally,

petitioner husband’s Form W-2 for his 2005 tax year listed his address at the

Southaven residence, indicating that he regarded the Southaven residence to be his

residence for Federal tax purposes.4

      Respondent also points to petitioner husband’s continued record ownership of

the St. Louis property, despite the separation and divorce from Ms. Barton, as

evidence that it was his principal residence. During 2007, when the divorce decree

granted ownership of the St. Louis property to Ms. Barton, record title to the St.

Louis property continued to be in the names of both Ms. Barton and petitioner

husband. Petitioner husband contends that he allowed his name to remain on the

deed to the St. Louis property to accommodate Ms. Barton so that she would not

face the risk of losing the St. Louis property in a potential refinancing, a result that

would force additional transition and stress upon K.J.H., who was already in a

delicate situation due to his parents’ separation and divorce. We are persuaded by

petitioner husband’s testimony that he intended to financially support his son K.J.H.



      4
         We are aware that during 2006 petitioner husband received a Form W-2
listing the St. Louis property as his address. However, as petitioner husband
testified at trial, we believe that to be an error because the previous Form W-2 for
2005 listed his correct address at the Southaven residence and he received no mail
correspondence at the St. Louis property after he moved during 2004.
                                         - 11 -

when he decided not to take any action to remove his name from the record title on

the St. Louis property.

      On the basis of the foregoing, we hold that the St. Louis property was not

petitioner husband’s principal residence after April 17, 2005. Therefore, pursuant to

section 36(c)(1), petitioners qualify as first-time homebuyers that are entitled to the

FTHBC.

      In reaching the foregoing holdings, we have considered all the parties’

arguments, and, to the extent not addressed herein, we conclude that they are moot,

irrelevant, or without merit.

      To reflect the foregoing,


                                                         Decision will be entered for

                                                  petitioners.
