Disposition of home with the credit

[JoeW]

Client bought the home in 2008 and took the 7,500 credit for 1st time homebuyer credit which is scheduled to start being repaid with the 2010 return over 15 year.
Client is going to sell the house for a loss after adjusting basis for the credit.
I know there is no immediate recapture but does he have to repay the loan over the 15 year period.

[taxdude71]

Don't know any reason that he wouldn't

[snowshine]

The credit is recaptured in the year of disosition, but the recapture cannot exceed the gain on the disposition. See TTB 11-3. Sounds like he gets to keep the money. If he has a gain, remember to add the $500 he had to repay on the credit this year to the basis. The IRS will want a copy of the selling statement and a DETAILED basis worksheet before they agree. Good luck!.

[JoeW]

That is how I was reading page 11-3 but wanted some other opinions. Thanks

[Maribeth]

The credit is recaptured in the year of disosition, but the recapture cannot exceed the gain on the disposition. See TTB 11-3. Sounds like he gets to keep the money. If he has a gain, remember to add the $500 he had to repay on the credit this year to the basis. The IRS will want a copy of the selling statement and a DETAILED basis worksheet before they agree. Good luck!.

But also remember to reduce basis by the amount of the credit he received. With the basis reduced by the $7500, the taxpayer may have a gain.

Maribeth

[JoeW]

Thanks, he said he would a loss after reducing basis by the credit of 7500.