Rev. Rul. 84-63

1984-1 C.B. 10, 1984-18 I.R.B. 4.

                       Internal Revenue Service
                                 Revenue Ruling

   RESIDENTIAL ENERGY CREDIT;  INSTALLATION OF LEASED SOLAR HOT WATER SYSTEM

                           Published: April 30, 1984

Section 44C. - -Residential Energy Credit, 26 CFR 1.44C-2: Definitions.

  Residential energy credit;  installation of leased solar hot water system.  The cost of the installation of a leased solar domestic hot water system does not qualify for the residential energy credit under section 44C of the Code.

ISSUE

  Is a taxpayer eligible for the residential energy credit on an expenditure for the installation of a solar domestic hot water system that the taxpayer leases?

FACTS

  The taxpayer leases a solar domestic hot water heater from Company A.  In addition to the normal monthly lease payments, Company A charged the taxpayer a fee of $50x for installing the equipment.

LAW AND ANALYSIS

  Section 44C(a) of the Code allows a residential energy credit for qualified renewable energy source expenditures.

  Section 1.44C-2(b) of the Income Tax Regulations provides that the term renewable energy source expenditures means an expenditure made by a taxpayer for renewable energy source property (as defined in section 1.44C-2(e)), or for labor costs properly allocable to the onsite preparation, assembly or original installation of such property.  The term renewable energy source expenditures does not include the cost of maintenance of an installed system or the cost of leasing renewable energy source property.

  Section 1.44C-2(e)(1) of the regulations defines the term "renewable energy source property" to include solar energy property.

  Section 1.44C-2(f)(1) of the regulations provides that the term "solar energy property" means equipment and materials of a solar energy system (and parts solely related to the functioning of such equipment) that when installed in connection with a building transmits or uses solar energy to heat or cool the dwelling or provide hot water for use within a dwelling.

  A solar domestic hot water system is renewable energy source property as defined in section 1.44C-2(e) of the regulations.  The cost of leasing renewable energy source property is not a renewable energy source expenditure under section 1.44C-2(b).  Installation costs are only allowed if properly allocable to the renewable energy property.  The installation costs, however, must be incurred by the taxpayer in connection with property that qualifies for the credit. Because the leased renewable energy source property does not qualify for the credit, any installation costs associated with the leased property also do not qualify for the credit.

HOLDING

  The taxpayer is not eligible for the residential energy credit on an expenditure for the installation of a solar domestic hot water system that the taxpayer leases.

Rev. Rul. 84-63, 1984-1 C.B. 10, 1984-18 I.R.B. 4.