First time homebuyer and siblings

[ChEAr$]

Did we finally ALL agree that buying a house from a sibling does not qualify for the FTHB credit?

[Jesse]

I disagree, lineal descendant is related for the FTHBC and a sibling is not a lineal descendant.

[erchess]

No

I was personally persuaded by the arguments in favor of siblings not being related parties for FTHB purposes. My memory is shot and I can''t give you any of those arguments so before I actually did a return that way I would look up the old thread and then the cites and possibly more besides.

[powerage]

I agree. In Pub.17 for who cannot claim the credit. #7 states. "You acquired your home from a related person". A sibling is a related person. No credit is allowed.

[Larmil]

I agree. In Pub.17 for who cannot claim the credit. #7 states. "You acquired your home from a related person". A sibling is a related person. No credit is allowed.

By some definitions a cousin is a related person.

[outwest]

I don't know if we agree, but the law says:

36(c)(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).

In other words: spouse, parents, & kids.

[powerage]

By some definitions a cousin is a related person.

Yes, I know.

In Pub. 544 there is a definition of a related person for IRS purposes. Brothers, sisters, half-brothers and half-sisters are included along with spouse, parents, grandparents and lineal descendants.

[Bees Knees]

A sibling is not a related person...according to the code.

I agree. In Pub.17 for who cannot claim the credit. #7 states. "You acquired your home from a related person". A sibling is a related person. No credit is allowed.

There really is no question about this. Paragraph 4 of Section 267(c) says: “the family of an individual shall include only his brothers and sisters…spouse, ancestors, and lineal descendants…”

Code Section 36(c)(5) says: “…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.”

Thus it is quite clear that the code section on the First Time Homebuyer credit is specifically excluding brothers and sisters from the definition of “related persons.”

In other words, if you buy a home from your sibling, it may qualify for the First-Time Homebuyer Credit.

[BP.]

"Related persons" for this purpose are ancestral or lineal. Siblings are not disqualifying. See 5405 instructions, p. 2 & pub 544 ch 2.

[Larmil]

36(c)(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).

In other words: spouse, parents, & kids.

What if the taxpayer buys the house from a corp of which a parent is 100% owner?

[powerage]

I just got off of the phone with the IRS. We ran through a scenario where I would be the FTHB, buying my half-brother's house. He said I would qualify.

I do not understand how siblings can be a related person for some tax purposes and not related for other tax purposes. I guess my 3 brothers and I are not really related.

So there we have it, I guess a sale between siblings would qualify.

[Bees Knees]

I do not understand how siblings can be a related person for some tax purposes and not related for other tax purposes. I guess my 3 brothers and I are not really related.

OK, this is your first mistake...thinking tax law is suppose to make sense.

Tax law is full of contradictions. The sooner you realize that, the sooner you can move on and understand how to interpret tax law. Just because 2 + 2 = 4 in the real world does not mean it equals 4 in the IRC.

[Bees Knees]

I just got off of the phone with the IRS.

And this is your second mistake.

Never never never never never never never never never call IRS to ask a tax question....unless of course you don't mind getting a wrong answer half the time.

[taxea]

I guess the answer to the post is a resounding NO. However in reading the responses I noticed that several posters are taking the definition of "related" from other areas of the law rather to sticking to the specifics of the rules for this purpose.
For 5405 purchases the instructions clearly state linear relations...that, as so well described in posts above, does not include bro and sis....and don't even start on cousins.

[powerage]

I had thought I had stopped trying to make sense of the tax code. I guess I was wrong lol.

I think that was only the second time I've called them. Maybe I'll call my boss and see what he says.