another FTHB credit question

[oceanlovin'ea]

Clients bought a house for $68,000. So their credit is 10% of the purchase price or $6800.

I was just wondering if the purchase price can include closing costs that they have to pay. On depreciation we use total purchase price and in sales of property the purchase price is reduced by closing costs. So does the closing costs affect the purchase price for purposes of the credit?

Thanks.

Linda

[fliszt]

Linda,

I believe the purchase price is the "total" price paid for the home. At least that's how I've been doing it. I haven't read anywhere where it states to remove certain costs from the total price.
Larry

[ChEAr$]

Most sales come with the HUD long page with buyer and seller columns, and it is line
one which is the price of the house and available for the credit computation.

Closing costs relate to the loan and not the price of the house.

[Jesse]

Not sure if correct but with lack of guidance....

I've been adding the closing costs that relate to purchasing the home, but not costs of obtaining the loan as listed in Publication 551.

Settlement costs. You can include in the basis of property you buy the settlement fees and closing costs for buying the property. You cannot include fees and costs for getting a loan on the property. (A fee for buying property is a cost that must be paid even if you bought the property for cash.)

The following items are some of the settlement fees or closing costs you can include in the basis of your property.
Abstract fees (abstract of title fees).

Charges for installing utility services.

Legal fees (including title search and preparation of the sales contract and deed).

Recording fees.

Surveys.

Transfer taxes.

Owner's title insurance.

Any amounts the seller owes that you agree to pay, such as back taxes or interest, recording or mortgage fees, charges for improvements or repairs, and sales commissions.

[BP.]

See 5405 instructions. Certain closing costs can be included in purchase price. Examples given are legal fees and recording fees.

[oceanlovin'ea]

Thanks

Thanks everyone for your help. I will let them know to be sure to bring closing papers with them when they come for their appointment.

Nice to be on the board again.

Linda