First-Time Homebuyer Credit Denied to Estate Beneficiary

Kathryn Menges, along with three other family members, was named as a beneficiary of a piece of real property in her grandmother’s will. Her grandmother died in 2009. Menges disclaimed her interest, and after a series of transfers by the other beneficiaries she bought the property and claimed a $8,000 First-time Homebuyer Credit (FTHBC) on her 2008 tax return. The credit was denied by the IRS. Menges died in 2011 and her estate brought a claim challenging the denial of the credit.

In Menges v. Miller, the Tax court denied the summary judgment motion made by Menges’ estate and granted the IRS’ summary judgment motion. The court held that the denial of the credit was correct because as a beneficiary of the estate she got the property from a “related person” and thus the transaction did not qualify for a FTHBC credit.

See Jillian Merns, No First Time Homebuyer’s Tax Credit for Estate Beneficiary, Wealth Management, Dec. 8, 2014.

Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.