To: Dr. Otterham
From: Cathy Buchanan
Re: Case 3: Qualified Rehabilitation Expenditures
Date: June 7, 2014
Executive Summary: Case three was centered around two key debates falling under IRC §47. The first was whether or not moving a building was basis enough for disallowing rehabilitation expenditures credit and the second was whether the expenses incurred in moving the building qualify as qualified rehabilitation expenditures. The taxpayer’s defense in this case was built largely on the stance that statutory language was misaligned with original Congressional intent and that the
IRS was interpreting the original legislation too narrowly. I agreed with the Taxpayer’s view in this case thanks in large part to the relevant Nalle case decision she cited and the precedential value it had coming from the U.S. Court of Appeals. The taxpayer also presented numerous similar cases of instances in which regulations were misaligned with original congressional intent. Although I side with the taxpayer in the form of the $3,000 rehabilitation expenditures credit, I agree with the IRS’s stance that the moving expenses are not qualified rehabilitation expenditures. I agree with the IRS because of their ability to provide a relevant Supreme Court decision that showed the moving expenses should be capitalized as part of the acquisition cost- basis of the building and thus not allowed as rehabilitation expenditures since acquisition costs are disallowed from qualified rehabilitation expenditures.
Facts:
* Marta purchased a 1920s house from Atlanta and moves it back to her hometown of Manhattan, Kansas where she renovates it so that her community can enjoy its architectural features. * After one year, the renovations are complete and Marta reduces her tax liability by using the rehabilitation expenditures credit. Her