Monthly Archives: May 2017

This is NOT the best way to claim the Residential Energy Credit!

A recent Tax Court case, Wainwright v. Commissioner.. Tax Court Memo 2017-70, provides a lesson in how not to claim a residential energy credit. The taxpayer and his friend worked and lived together. They lived in a home that the friend had purchased before she and the taxpayer met. While they were living together in the home, they refinanced the mortgage as co-borrowers. During 2010 and 2011, the taxpayer lived in the home, paid the mortgage payments, and maintained the property. On his 2010 federal income tax return the taxpayer claimed, among other credits and deductions, a $1,500 residential energy credit arising from the installation of energy-efficient windows and “other energy saving assets” in the property. When the IRS issued a notice of deficiency, one of the items it disallowed was the residential energy credit.

To substantiate the credit, the taxpayer provided an invoice from a local window company, issued to the taxpayer’s friend who also lived in the home. The invoice showed a “contract amount” of $11, 934, a “deposit” of $3,580, and “payments” of $8,354. It showed an “install date” of March 5, 2011.

The Tax Court found that the invoice was insufficient proof of the claimed credit, pointing to several shortcomings. First, it did not describe in any detail what sort of windows were installed. Second, it did not specify the property on which they were installed. Third, the taxpayer’s name was not on the invoice. Fourth, the invoice did not disclose who paid the deposit or who paid the payments. Fifth, and this is the clincher, the invoice stated that the windows were installed in 2011, but the taxpayer claimed the credit on his 2010 federal income tax return.

Ouch!

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Bruce – Your Host at The Tax Nook

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