FTHB Credit

[Janice Terry]

I have a client who is unmarried and is buying a home with his girlfriend as tenants in common. Neither has owned a home before. However, they are buying the home from the girlfriend's father on a land contract.

Since girlfriend would not qualify for 1/2 of the $8,000 credit, can my client claim the entire amount?

[Gene V]

I would say yes

Since girlfriend would not qualify for 1/2 of the $8,000 credit, can my client claim the entire amount?

From Notice 2009-12

Example 4.
A and B each contributes $50,000 towards the $100,000 purchase price of a
residence and owns a one-half interest in the residence as tenants in common. Under
§ 36(b)(1)(A), the allowable credit is not $10,000 (10 percent of the purchase price) but
is limited to $7,500. However, B is not a first-time homebuyer within the meaning of
§ 36(c)(1). Therefore, no portion of the credit may be allocated to B because B is not
eligible to claim any portion of the credit. A may claim the entire allowable $7,500
6
credit.

http://www.irs.gov/pub/irs-drop/n-09-12.pdf

[Janice Terry]

I had seen Example 4 also, which made me think he could claim the entire credit. Thanks for your help.

[Black Bart]

Janice,

I don't know the answer to your question (Gene's always a good reference though), but you can check out this older thread which had some good posts in it: "Homebuyers Credit Chart" by poster Tilt53 on page 3 (11-16-09). The discussion goes beyond the basics implied by the title.

You might also try clicking on "Search" at the top of this page and entering "FTHB" in the drop-down box. You'll get a complete list of homebuyer credit posts that may be helpful.

I see you're new and welcome to the board. You'll usually get more answers to posts than you have, but many of us aren't real sure about the specifics of this credit just yet -- not to mention that it just keeps evolving and it's kind of dicey to recommend anything to clients because IRS makes occasional retroactive changes.

Good luck.

[gboykin]

Yes, the credit can be allocated in any reasonable manner. Therefore, your client would qualify to take the entire credit.

[Janice Terry]

Does the land contract agreement need to be attached to the return?

Thanks for all of your help!

[Black Bart]

Land contracts

Does the land contract agreement need to be attached to the return? Thanks for all of your help!

According to a TaxAuthority Update Bulletin (by owners of this board) any purchases after 11-6-09 must be accompanied by a copy of the settlement/contract/statement. Before that it was up to the preparer.

Actually there was some difference of opinion as to whether land contract sales qualified since title isn't transferred until paid in full. See the posts I previously referred to wherein it was discussed (I think the consensus was that land contracts are okay).

Also, after 11-6-09, you'll need a new form (see below clip from the IRS website).


Information regarding the 2008 Form 5405,
First-Time Homebuyer Credit
Changes have been made to the first-time homebuyer credit by Public Law
111-92, the Worker, Homeownership, and Business Assistance Act of 2009,
which was enacted on November 6, 2009. As a result, the 2008 Form 5405
can be used only for homes purchased before November 7, 2009, for which
an election is made to claim the credit for 2008. We will soon issue a
December 2009 revision of Form 5405. The December 2009 revision will be
for use for all homes purchased after November 6, 2009 (whether the credit
is claimed for 2008 or for 2009) and for all claims on 2009 returns for
homes purchased any time in 2009.

[Janice Terry]

They purchased home on September 30, so I won't attach the land contract agreement. And I can use the old Form 5405?

Thanks.

[Jesse]

I'm not 100% sure, but I think for any claims filed after 11/06/09. The filing of the 5405, not the purchased date, is what will require documentation of purchase to be attached. So I would say yes, you will need to attach a copy of the land contract.

Just browsing the board this morning, if I find more information later I'll come back and post. In the mean time maybe someone else will chime in.

[Black Bart]

Jesse,

I'm not 100% sure, but I think for any claims filed after 11/06/09. The filing of the 5405, not the purchased date, is what will require documentation of purchase to be attached. So I would say yes, you will need to attach a copy of the land contract.

I disagree -- here's that clip* from the IRS website again and it seems pretty clearcut about the purchase date governing (have you seen anything to the contrary?).

*Information regarding the 2008 Form 5405,
First-Time Homebuyer Credit
Changes have been made to the first-time homebuyer credit by Public Law
111-92, the Worker, Homeownership, and Business Assistance Act of 2009,
which was enacted on November 6, 2009. As a result, the 2008 Form 5405
can be used only for homes purchased before November 7, 2009, for which
an election is made to claim the credit for 2008. We will soon issue a
December 2009 revision of Form 5405. The December 2009 revision will be
for use for all homes purchased after November 6, 2009 (whether the credit
is claimed for 2008 or for 2009) and for all claims on 2009 returns for
homes purchased any time in 2009.*

Of course, it won't hurt anything anything if she does attach a copy of the settlement (unless maybe those guys arguing against land contract eligibility were right). Some people sent claims in without documents and got their refunds alright while a few said IRS wrote back and asked for the papers. I filed two and sent documents to avoid a delay -- both went through okay.
.

[Janice Terry]

Thanks so much for your input. You guys have been great!