FTHB - Siblings related?

[Dusty2004]

A poster on another board I frequent asked "please correct me if I'm wrong. The house may be purchased from a brother, sister, aunt or uncle. "

My initial thought was No Way and another poster stated exactly that.

The original poster stated "I was basing my comment on the instructions page 2 (Who Cannot Claim.) No. 9 You acquired your home from a related person. This includes your spouse, ancestors (parents, grandparents, etc), or lineal descendants (children, grandchildren, etc.) It says nothing about brothers, sister, aunts or uncles."

I then read 5405 instructions and it specifically says "9. You acquired your home from a related person. This includes:

a. Your spouse, ancestors (parents, grandparents, etc.), or lineal descendants (children grandchildren, etc).

For more information about related persons, see the discussion under Non Deductible Loss in Chapter 2 of Pub. 544, Sales and other Dispositions of assets. When determining whether you acquired your main home from a related person, family members in that discussion include only the people mentioned in 9a above. "

When I look at Pub 544 for related persons it says "Related persons. The following is a list of related persons.
Members of a family, including only brothers, sisters, half-brothers, half-sisters, spouse, ancestors (parents, grandparents, etc.), and lineal descendants (children, grandchildren, etc.). "

However what has me confusted is in 5405 instructions it specifically says "WHEN DETERMINING WHETHER YOU ACQUIRED YOUR MAIN HOME FROM A RELATED PERSON, FAMILY MEMBERS IN THAT DISCUSSION INCLUDE ONLY THE PEOPLE MENTIONED IN 9A ABOVE".

Confusing and I wonder how many tax boxes will be able to answer this one...

Dusty

[Jesse]

lineal descendants is the key for 5405

When determining whether you acquired your main home from a related person, family members in that discussion include only the people mentioned in 9a above.

I don't see a question and it is confusing but for FTHB related parties apply, however the definition of family member includes only lineal descendants.

[Dusty2004]

So you are saying 5405 controls and not Pub 544

Even though 5405 says that related parties as defined in Pub 544?

I guess I can see both arguments and I am just looking for input as to what others think.

Dusty

[Jesse]

Even though 5405 says that related parties as defined in Pub 544?

In regards to Form 5405, yes, the definition of "Family members" overrides Pub 544.

[ChEAr$]

In regards to Form 5405, yes, the definition of "Family members" overrides Pub 544.

After reading it I must agree, too. Who would of thunk it? (grin

So then, brother and sister each own a house and agree to "swap", each selling to the
other. Presto! $16,000 bonus!

Ain't tax law interesting?

[erchess]

Economic Substance

I am the last person who would claim to be an expert on this doctrine but I personally would not apply the FTHB credit to any exchanges of half interest in the same house.

However I agree that an otherwise creditable purchase of a home unable to get the credit if the purchase is from a direct ancestor or direct descendant or spouse but is ok if made from a sibling or other relative.

The thing is Harlan's grin is ambiguous. He appears to me at any rate to use it both when a true statement about the rules seems humorous or ironic and when a statement contains a flaw that he expects us all to see.

[taxea]

Thanks Dusty...it sounds like the instructions for 5405 refer one to Pub 544 but then tell you that for purposes of this credit siblings are not included as "related parties".
To me that sounds more like the intention of the law. I have only read the IRS releases on this subject. Now I will read the instructions then I will go back to that "other forum" to see whether they have made any progress on this issue.

[New York Enrolled Agent]

After reading it I must agree, too. Who would of thunk it? (grin

So then, brother and sister each own a house and agree to "swap", each selling to the
other. Presto! $16,000 bonus!

Ain't tax law interesting?

I think the IRS would assert there was a step-transaction here and there would be no $16,000 bonus.

I would suggest to Taxea and others to not rely on pubs. §36 of the IRC gives the answer to related parties in reference to this credit.

(5) Related persons.
A person shall be treated as related to another person if the relationship between such persons would result in the disallowance of losses under section 267 or 707(b) (but, in applying section 267(b) and (c) for purposes of this section , paragraph (4) of section 267(c) shall be treated as providing that the family of an individual shall include ONLY his spouse, ancestors, and lineal descendants).

[ChEAr$]

I think the IRS would assert there was a step-transaction here and there would be no $16,000 bonus.

I would suggest to Taxea and others to not rely on pubs. §36 of the IRC gives the answer to related parties in reference to this credit.

(5) Related persons.
A person shall be treated as related to another person if the relationship between such persons would result in the disallowance of losses under section 267 or 707(b) (but, in applying section 267(b) and (c) for purposes of this section , paragraph (4) of section 267(c) shall be treated as providing that the family of an individual shall include ONLY his spouse, ancestors, and lineal descendants).

NYEA, you of course know that I agree with you about the step transaction. My comment revolved around what the great unwashed, the hoi polloi of the American
taxpaying public will think up and bring to us.

Now then, as for your quote above, please tell everybody if that precludes the credit
for siblings, and I will buy you another Coors Lite next time I see you.

Incidentally one of my clients was so excited about his wife buying her very first house.
(She was not tainted by any of his previous residences since they had rented for last
five years.)
So I asked who were these people who sold her the house? Husband on the deed was
her son in law. So at least he was not a lineal descendent of hers.
however the deal breaker was that husband's wife was also on the deed and sales
paper. Oh well!

[taxea]

"I would suggest to Taxea and others to not rely on pubs. §36 of the IRC gives the answer to related parties in reference to this credit"
You mean the actual instructions for the form can't be relied on when doing the return?? Heaven help us!
I'll take a Micalob light please.

[S T]

As previously posted

Many times it has been posted that Pubs can not be relied on - They are informational only.

You will have to search out and seek

Maybe this will give some additional guidance http://www.irs.gov/irs/article/0,,id=101102,00.html

A reference to Pub 17 is NOT an answer

Sandy