Can someone who holds only a remainder interest in a home - where a parent has a life estate and lives there - still qualify for New York's historic homeownership rehabilitation credit?

Plain-English summary

By a deed recorded on March 29, 2011, Petitioner was conveyed property at 19 Pleasant Street, Sidney, NY, subject to a life use and occupancy held by his mother for the rest of her life. Under the deed, Petitioner's mother is entitled to sole possession and enjoyment of the premises during her lifetime, and upon her death sole title passes to Petitioner as holder of the remainder interest. Petitioner reported that he resides in the home 25% or more of the year - typically 3 to 4 days every 2 to 3 weeks - and that he also receives mail and stores an antique car there. He asked the Department whether he is eligible for the historic homeownership rehabilitation credit under Tax Law § 606(pp) for this property.

The credit equals 20% of qualified rehabilitation expenditures made with respect to a "qualified historic home," a term that requires (among other things) that the structure be owned, in whole or in part, by the taxpayer, and that the taxpayer reside in the home during the taxable year the credit is claimed (Tax Law § 606(pp)(5)(A)(ii) and (iii)). The Advisory Opinion addressed only these two requirements.

On ownership, the Department reasoned that a remainder or future interest is still an ownership interest: under EPTL § 6-5.1, future interests are descendible, devisable, and alienable in the same manner as estates in possession. Because Petitioner holds the remainder interest in the property, he satisfies the ownership requirement. On residency, the Department found that residing at the property 25% of the year is sufficient, because the statute does not require the home be the taxpayer's primary residence and expressly contemplates that a taxpayer may have more than one residence (noting the dollar cap in Tax Law § 606(pp)(2)(A) that applies when a taxpayer has qualified expenditures for more than one residence in the same year).

The Department concluded that Petitioner satisfies the ownership and residency requirements for the credit, but stated it did not have sufficient information to address any of the credit's other statutory requirements (such as whether the rehabilitation expenditures themselves qualified).

What this means for you

Owning less than full title still counts

If you hold a remainder or future interest in a home - for example, because a parent retains a life estate and lives there - that interest can still satisfy the ownership requirement for the historic homeownership rehabilitation credit. New York treats future interests as ownership interests because they are descendible, devisable, and alienable like estates in possession under EPTL § 6-5.1.

Part-time residence can meet the residency test

The credit does not require the historic home be your primary or year-round residence. Regularly spending time there - in this case about 25% of the year - was enough to satisfy the residency requirement, though the total credit you can claim across multiple residences in a year is still subject to a single dollar cap under Tax Law § 606(pp)(2)(A).

This opinion doesn't confirm the whole credit

Meeting the ownership and residency tests is not the same as qualifying for the credit outright. The Department expressly did not address whether the rehabilitation expenditures, the property itself, or any other statutory requirement of Tax Law § 606(pp) were satisfied, so those elements still need to be established separately.

Common questions

Q: Does a remainder interest count as "ownership" for the historic homeownership rehabilitation credit?
A: Yes. The Department held that because future interests are descendible, devisable, and alienable like estates in possession under EPTL § 6-5.1, a taxpayer holding a remainder interest has an ownership interest that satisfies Tax Law § 606(pp)(5)(A)(ii).

Q: Does the home have to be the taxpayer's main residence?
A: No. The statute does not require the qualified historic home be the taxpayer's primary residence, and it contemplates a taxpayer having more than one residence.

Q: How much time did Petitioner need to spend at the property to satisfy the residency requirement?
A: Petitioner resided at the property about 25% of the year - roughly 3 to 4 days every 2 to 3 weeks - and the Department found that sufficient to satisfy Tax Law § 606(pp)(5)(A)(iii).

Q: Did this Advisory Opinion confirm Petitioner's full eligibility for the credit?
A: No. The Department addressed only the ownership and residency requirements and stated it lacked sufficient information to address the credit's other statutory requirements.

Q: What happens if a taxpayer has qualified rehabilitation expenditures for more than one residence in the same year?
A: Tax Law § 606(pp)(2)(A) caps the total credit allowed for all such qualified expenditures at the applicable dollar cap per taxable year, regardless of how many residences are involved.

Citations and references

• Tax Law § 606(pp) - historic homeownership rehabilitation credit, equal to 20% of qualified rehabilitation expenditures on a qualified historic home
• Tax Law § 606(pp)(5)(A)(ii) - requirement that the structure be owned, in whole or in part, by the taxpayer
• Tax Law § 606(pp)(5)(A)(iii) - requirement that the taxpayer reside in the home during the taxable year the credit is allowed
• Tax Law § 606(pp)(2)(A) - dollar cap on total credit where a taxpayer has qualified rehabilitation expenditures for more than one residence in the same year
• EPTL § 6-5.1 - future interests (such as a remainder) are descendible, devisable, and alienable in the same manner as estates in possession

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/income_ao_2014.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/income/a14_1i.pdf

Original ruling text

New York State Department of Taxation and Finance

TSB-A-14(1)I
Income Tax
January 27, 2014

Office of Counsel
Advisory Opinion Unit
STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. I130521A

The Department of Taxation and Finance received a Petition for Advisory Opinion from
name and address redacted. Petitioner asks whether he is eligible for the historic homeownership
rehabilitation credit for a home in which his mother has a life estate and he has a remainder
interest. We conclude that Petitioner satisfies the ownership and residency requirements for the
credit. We do not have sufficient information to address any of the other statutory requirements.
Facts
By a deed recorded on March 29, 2011, Petitioner was conveyed property at 19 Pleasant
Street, Sidney, NY 13838. The property was conveyed to him subject to the life use and
occupancy by his mother on those premises during her lifetime. The deed states that his mother
is “entitled to the sole possession and enjoyment of that premises. Upon her death, sole title to
the premises shall pass to the [Petitioner], his heirs, successors and assigns as holder of the
remainder interest in the premises.” Petitioner states that he resides in the home 25% or more of
the year, and that he is at the residence 3 to 4 days every 2 to 3 weeks. He also receives mail and
stores an antique car at the home.
Analysis
Section 606(pp) of the Tax Law provides a credit equal to 20% of the qualified
rehabilitation expenditures made by a taxpayer with respect to a qualified historic home. The
requirements of the definition of the term “qualified historic home” relevant to this Petition are
that the structure be owned, in whole or in part, by the taxpayer, and that the taxpayer reside in
the home during the taxable year in which the taxpayer is allowed the credit (see Tax Law § §
606(pp)(5)(A)(ii) and (iii), respectively). This Advisory Opinion will address only these two
requirements.
Petitioner has a remainder or future interest in the property. Under EPTL § 6-5.1, future
interests are descendible, devisable and alienable, in the same manner as estates in possession.
Accordingly, the Petitioner has an ownership interest in the property, and thus, he satisfies the
requirement in Tax Law § 606(pp)(5)(A)(iii). In addition, because Petitioner resides 25% of the
time at the property, Petitioner satisfies the requirement in Tax Law § 606(pp)(5)(A)(iii). The
statute does not require that the property be the taxpayer’s primary residence. The statute also
contemplates that a taxpayer may have more than one residence. There is a dollar cap per
taxable year on the amount of the credit that is allowed, and the statute states specifically that, if
the taxpayer incurs qualified rehabilitation expenses in relation to more than one residence in the

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TSB-A-14(1)I
Income Tax
January 27, 2014

same year, the total amount of credit allowed for all those qualified rehabilitation expenditures
shall not exceed the applicable dollar cap (see Tax Law § 606(pp)(2)(A)). Thus, the fact that
Petitioner resides in the home 25% of the year is sufficient to satisfy the residency requirement.

DATED: January 27, 2014

NOTE:

/S/
DEBORAH R. LIEBMAN
Deputy Counsel

An Advisory Opinion is issued at the request of a person or entity. It is limited to the
facts set forth therein and is binding on the Department only with respect to the
person or entity to whom it is issued and only if the person or entity fully and
accurately describes all relevant facts. An Advisory Opinion is based on the law,
regulations, and Department policies in effect as of the date the Opinion is issued or
for the specific time period at issue in the Opinion. The information provided in this
document does not cover every situation and is not intended to replace the law or
change its meaning.