FTHB credit for current owner

[Jan S]

My client has a home in Michigan where he has lived for 10 years. He is in the process of purchasing another home in Las Vegas. He plans to sell the Michigan home and move to Vegas after the Michigan house sells. He would qualify for the $6,500 credit amount.

We have 2 issues:

1. How long does he have to make the Vegas home his principal residence? What if it takes a year or longer to sell the Michigan home? (a good possibility) He is definitely planning on moving as soon as he sells the Michigan home. If he doesn't move for over a year, his 2010 tax return will show the Michigan address.

2. What if he rents the Vegas home for a couple of months before he moves there? I know that rental homes don't qualify. Remember, he is purchasing the home as a principal residence. He has been told that the Vegas area gets Canadian residents who come there and rent homes for 3-4 weeks at a time. He has been told that it would be a good possibility that he could easily rent his home short term. If he rents it, there would be a Schedule E on his 2010 return.

I asked this question at my tax seminar and didn't get a clear answer. I was told to call the IRS regarding Question #1. I haven't found anything that addresses this specific issue.

Thanks for any help you can provide.

[AJsTax]

time limits

Question #1. He must sign a contract before 5/1/2010 and make it his primary residence before 7/1/2010. I believe it would be the same as if building, if you do not move into it or intend to be moving into it before 7/1/2010 you can not claim the credit.

2. The credit is not available for rental units, but you might get away with it if he is moved in within the time limits. Buy and close on it now, rent for a couple months early in 2010 and then move into it before 7/1/2010..

If he does not intend to move into it before next summer I do not believe he can claim the credit. The old house does not need to be sold in order to claim the credit, just have to make the new one the primary residence.