First-time homebuyer document question

[taxxcpa]

I received this question from a client;
My fiance and I bought the house together but a lot of the documents that you said we should sent to the IRS are only in her name. Should she file everything only under her name and take the full refund or should we file everything together and thus split the total refund. Let me know which avenue we should take and how we should file.

The client lives in a state that recognizes common law marriage, so they can file a joint return.

It looks to me like they could file jointly and get the $ 8000 even though his name is not on all the documents. Am I wrong?

[Koss]

Common Law Marriage?

The decision to file jointly or separately needs to be motivated by a variety of factors--not just the Homebuyer Credit.

Based on the limited fact pattern you provided, and assuming that both are indeed eligible for the Homebuyer Credit, it would appear that they can claim the credit on a joint return.

But the facts you provided raise a number of serious questions that are not directly related to the Homebuyer Credit. Among them:

(i) Have they ever filed a joint return before? Once they do so, they are declaring themselves to be in a common law marriage for federal tax purposes. That decision can't be "undone" very easily. Going forward, they will either have to file MFJ or MFS. Single will no longer be an option. There is no such thing as a common law divorce. To untie the knot, they would have to get a real divorce.

(ii) Have they taken any other steps, apart from the home purchase, to establish a common law marriage? For example, joint checking accounts, joint ownership of vehicles, or both names on the lease of their residence prior to the home purchase?

(iii) Why isn't his name on the documents? And what documents are they referring to? The deed? The mortgage note? The closing statement?

If this guy contributed money to the downpayment that was used to buy the house, and his name does not appear anywhere in the closing documents, then he oughta have his head examined.

Referring to each other as "fiancee" does not establish a common law marriage. If anything, it suggests that the couple intends to marry, but has not yet inked the deal. This might actually imply that a common law marriage does not exist, because the final decision has not been made. Either one could still change their mind. Planning to get married is not a common law marriage.

What if she died tomorrow? What happens to the house??



Does she have a will? Or would the entire house pass to her blood relatives, after her "fiancee" paid half the downpayment? Or maybe even more than half?

This couple needs to talk to a lawyer. Yesterday. Last week. Last year. The discussion should have taken place before the closing.

BMK

[taxxcpa]

FTHB credit

You raise a lot of additional questions but most of them are beyond the area of taxation.

I believe you DID answer my question in the following sentence:
"Based on the limited fact pattern you provided, and assuming that both are indeed eligible for the Homebuyer Credit, it would appear that they can claim the credit on a joint return."

If others disagree, I would like to know if the fact that only one spouse is shown on the documents would create a problem.

I've made inquiries on other forums. Some agree with my assumption. Others cover a range of other aspects of the credit but don't provide an opinion on the actual question. So far, no one has suggested that the documents have to be in both spouses' names.

[Jesse]

Good to see you back Burton!

taxxcpa, I agree with your conclusion, as they both qualify for the first time home buyer credit, even though the house is in her name only, they can take the credit on a MFJ return.

[Gretel]

Burton, I always appreciated your deep insight in life situations and how they relate to tax laws.