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    #1

    First time homebuyer credit

    OK, here is a screwball one for you. New client gets my e-mail address from mortgage broker and e-mails me copies of 08 return and the settlement stmt from the home she purchased. All seems normal, but I need to dig a little deeper. I call the client and ask if they have owned a home in the last 3 years. She says yes, she is on the title of her parents house so it won't have to go thru probate. I say uh oh let me research this. I read and it says "principle residence" and also gives examples of owning a rental home. So I think cool, I call her back and ask if she lived there. Her answer was after her dad died in the early 90's she moved in and has lived there, paying rent (probably unrecorded) to mom until she bought this house.

    So in a nutshell she is on the title for probate purposes and she lived there as her principle residence. Do you think she qualifies for the credit or not? I do not think she does. If you have any authoritative links please send those as well.
    I would put a favorite quote in here, but it would get me banned from the board.
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    #2
    I think the rules in this case speak for themselves:

    1. She owned an interest in a residence
    2. She used that residence as her personal residence during the 3 year lookback

    The rent and probate issues are noise distortion.

    ATG
    "Congress has spoken to this issue through its audible silence."
    Anyone ever notice they beat the daylights out of the definition of a child, but they don't spend much time at all defining "parent"?

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      #3
      What I see.

      That is what I see as well. And with the fraud penalty on the preparer (see the guy in FL) I just do not think it is worth it to see if this will fly. I cannot find anything stating that if the ownership interest was strictly a probate avoidance issue then you can still claim the credit.
      I would put a favorite quote in here, but it would get me banned from the board.

      Comment

        #4
        I agree with ATG.

        Comment

          #5
          On a larger note, I get that people want to avoid estate issues in the end, but I'll never understand why there isn't more use of trusts (though I know they are pricey) in cases like this. IMHO if you have enough assets to be worried about estate tax, you have enough money to get a trust in place. However, I can't even convince my dad to get a will, so I suppose I'm not one to talk.

          ATG
          "Congress has spoken to this issue through its audible silence."
          Anyone ever notice they beat the daylights out of the definition of a child, but they don't spend much time at all defining "parent"?

          Comment

            #6
            Trust

            It would not cost that much money to have a trust drawn up for the house. So if they just did it for the stupid house she would be fine.
            I would put a favorite quote in here, but it would get me banned from the board.

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              #7
              Originally posted by AuditorTurnedGood View Post
              On a larger note, I get that people want to avoid estate issues in the end, but I'll never understand why there isn't more use of trusts (though I know they are pricey) in cases like this. IMHO if you have enough assets to be worried about estate tax, you have enough money to get a trust in place. However, I can't even convince my dad to get a will, so I suppose I'm not one to talk.

              ATG
              I think it's rather the concern about probate than estate tax. Still it should be done right, but people don't know what they are getting into just seeing one aspect of it.

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                #8
                It's the probate issue and the nursing home issue. Most think the state will take the house if Mom has to go into a nursing home, and they are trying to shield it for the heirs. Let the taxpayer pay the Medicaid costs.

                Comment

                  #9
                  Transfer

                  I believe and think that most taxpayers think that they can transfer assets through Quit claim deed and avoid the Medicaid rules. Therefore there seems to be a lot of transfer of deeds from parents and adding children or transferring. More of a nursing home issue than a probate issue.

                  A lot of misinformation!

                  Sandy

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