During a recent Sunday afternoon excursion, Miriam, an admirer of early twentiet

Question

During a recent Sunday afternoon excursion, Miriam, an admirer of early twentieth-century architecture, discovers a 1920s-era house in the country- side outside Mobile, Alabama. She wants not only to purchase and renovate this par- ticular house but also to move the structure into Mobile so that her community can enjoy its architectural features. Being aware of the availability of the tax credit for rehabilitation expenditures, she wants to maximize her use of the provision, if it is available in this case, once the renovation work begins in Mobile. Miriam also informs you that she will pursue the purchase, relocation, and renovation of the house only if the tax credit is available. Comment on Miriam’s decision and on whether any renovation expenditures incurred will qualify for the tax credit for reha- bilitation expenditures.Partial list of research aids: George S. Nalle III v. Comm., 93–2 USTC {50,468, 72 AFTR 2d 93–5705, 997 F.2d 1134 (CA–5, 1993)

Explanation / Answer

Miriam is eligible to take the credit which will be 10% of the cost. This credit is available on the cost we incur for rehabilitation and reconstruction of certain buildings.

Since Miriam discovers the house which belongs to 1920, she will get 20% credit of the cost. Although 20% credits are available for the rehabilitation of certified historic structures. Please note that Rehabilitation includes renovation, restoration, and reconstruction. It does not include enlargement or new construction.

Also note that the rehabilitation tax credit is not allowed for expenditures with respect to property that is considered be tax exempt use property.

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