FTHB another

[Acownt4it]

Single Taxpayer bought house in 2008 on land contract and received the $7500 credit. She is aware this is a payback credit....
Land contract fell through in October 2009 (seller's fault), she lost all money paid to seller.
She got married in July 2009 and bought a house in October 2009 with husband. What the best course of action?
Amend 2008 return and repay the $7500? Will this qualify her and her husband for FTHB credit of $8,000 since deal fell through?
Any and all help is welcome.

[spanel]

I'd say she will have to pay all the $7,500 on her 2009 taxes.

Because she has owned a house she has lived in the last 3 years, she does NOT qualify for the $8,000.



One reason Land contracts are BAD for buyers and GREAT for sellers.


Chris

[Burke]

Single Taxpayer bought house in 2008 on land contract and received the $7500 credit. She is aware this is a payback credit....
Land contract fell through in October 2009 (seller's fault), she lost all money paid to seller.
She got married in July 2009 and bought a house in October 2009 with husband. What the best course of action?Amend 2008 return and repay the $7500? Will this qualify her and her husband for FTHB credit of $8,000 since deal fell through?

Interesting. I believe since the first contract fell through and she no longer has the first residence, she has to amend 2008 no matter what, and repay all the credit under those rules. Now, however, will she be under the qualification of "any ownership interest" in a house within the last 3 years that would disqualify her for the new one? Don't know.

[WhiteOleander]

If this had been a typical foreclosure, it would not negate the fact that the t/p had ownership in a personal residence in the prior 3 years. So, this t/p has had ownership in the prior 3 years. She owes the 7500 back and cannot qualify for the credit now.

Since they bought the house in Oct., they can't qualify under the new rules. The tax code will never be fair to everyone.

[spanel]

Plus the fact she didnt live in the house 5 consecutive years during the last 8 years. ($6500 credit)


Chris

[Jesse]

Not sure of what the circumstances were, was there a gain on the disposition of the land contract? Perhaps a out on the $7,500 payback.

The credit is recaptured ratably, interest free, over 15 years starting the second tax year after the credit is claimed (first installment begins in 2010 and is treated as additional tax). If the home is disposed of or ceases to be a principal residence before the end of the 15 years, the remaining credit is recaptured in that year, not to exceed gain on disposition.

As others said since ownership in a home she will no longer qualify for the first time homebuyer and it doesn't sound like the consecutive 5yr would apply either.