Sorry, but another FTHBC question

[Art]

Step-Mom inherited a house from her mother who died in Dec 2008. In 2010 Step-son wants to purchase the home and step-Mom wants to make a “gift in equity” (real estate agent’s terminology for transfer of partial interest in property?) of $13000 of value in the home (current annual gift exclusion limit). Current FMV is approx $ 68000. Step-son will pay $ 55000 securing financing from a local bank. The home will be titled in his name only and no one is co-signing on the loan with him.

Q1 Does the step- Mom/Step-son relationship disqualify him from taking the credit? The instructions just name spouse, ancestors, and lineal descendants. Has anyone found anything to the contrary?

Q2 Does the “acquiring by gift” (item 8 of the instructions) disqualify the home acquisition entirely or only to the extent of the value of the gift?

Q3 Would it be better for Step-Mom (or preferably for Dad) to make a cash gift to the step-son and have him purchase the home for full FMV of $ 68000 ?

Comments/Suggestions?

[Jesse]

I think the step Son/step Mom or Dad relationship = lineal descendant.

[Dusty2004]

I agree with Jesse

Once a parent child relationship is established it is not broken from the IRS's standpoint. If you marry someone with a child that is not your child you are considered the parent of that child - even if you get divorced.

Your other questions do not matter because they are the child.

Dusty

[ChEAr$]

If you marry someone with a child that is not your child you are considered the parent of that child - even if you get divorced.

Dusty

After one is divorced and that former step child is not living with taxpayer?

Or are you narrowing your comment just to forbidden relationship for purposes of the FTHBC?

[Art]

Point of clarification. If this helps, the son in question is 27 and is not a dependent. His father is currently married to the step-mom posed in the facts above.

[Dusty2004]

ChEAr$

After one is divorced and that former step child is not living with taxpayer?

Or are you narrowing your comment just to forbidden relationship for purposes of the FTHBC?

The relationship continues even if the child does not live with the step parent after divorce. If dad has a son and re-marries the wife become a step mom. If they are divorced the step mom is still the mom. If the son lived with dad then dad could sign 8332 to release the exemption to the step mom - same as if was birth mother.

Dusty

[Dusty2004]

Art

Point of clarification. If this helps, the son in question is 27 and is not a dependent. His father is currently married to the step-mom posed in the facts above.

The age of the child does not matter in this case. It is a purchase of a house from a parent.

Dusty

[Art]

Thanks for all the posts. Looks like he is out of luck on FTHBC.