First time home buyer credit - one buyer qualifies / one does not

[New York Enrolled Agent]

I agree with Bees - we do not know for sure but I was suggesting in my earlier post as Mlinder42 & BB concluded that it appears the full $7,500 would be allowed to the one individual.

The CRS document suggests IRS thinking would be similar to the DC Home Buyer credit. The maximum for that credit is $5,000 (smaller than the current maximum of $7,500 for this new credit).

Here are the instructions for line 1 of Form 8859 (the DC first-time homebuyer credit).

"If two or more unmarried individuals buy a main home, they can allocate the credit among the individual owners in any manner they choose. The total amount allocated cannot exceed $5,000 (or the purchase price if it was less than $5,000)"

IF (the big IF) IRS reasoning follows the DC credit, it appears the son will be eligible for the full $7,500. We shall see what the Secretary prescribes as per §36(b)(1)(C).

[eddiebaker50]

One Qualifies, one doesn't

My son is considering purchasing a home with a friend from his friend's father. I told him that the way I read it, he can claim the $8,000 credit and his friend is not eligible.

[Redneck]

Form 5405

She would be co-owner with him.

On line B of Form 5405 would not the son put 50% share of credit because he only own's half of the home??????????

[erchess]

Red

That's precisely the question under debate. The answer being put forth by NYEA and Bees, who are two of the most knowledgeable people here, is that the LAW states that the answer to this question is to be decided by the Secretary of Internal Revenue who has not yet publicized a decision. The guess of these two gentlemen is that the IRS might well follow the logic of its decision in regard to the DC Homebuyer Credit, which would allows co owners to split the credit any way they agree so long as no one who is ineligible claims the credit and they do not between them claim more than the allowable total.

[AJsTax]

Quote

"However, unmarried joint purchasers may allocate the credit amount to any buyer who qualifies as a first-time buyer, such as may occur if a parent jointly purchases a home with a son or daughter."
This says that the eligible buyer may receive the entire credit. Not based on % of ownership or the fact that one buyer is not eligible.
How knowledgeable is this source? You decide on your own. I believe them to be correct.

http://www.federalhousingtaxcredit.com/2009/faq.php

Be very cautious if it is not an arms-length sale.