First time home buyer credit

[Hamacher]

I have a tax payer that received the first time home buyer credit but is now thinking about using 20% of her home for a home office. Will she need to return 20% of the $8,000 that she received?

Thanks in advance for the help!

[solomon]

A home office under PL 110-289 is not considered non-qualified use for the §121 exclusion. Therefore, a home office would not negate any part of the FTHB credit.

If you are interested, the Code is §121(b)(4).

[Hamacher]

Found more info.

After talking to the client....

Actually it will be a little more than a home office... I will actually be blending, bottling and if possible selling wine. What are your thoughts regarding this type of activity?

[DaveO]

I would say if the house is still their primary residence then they can keep the credit. Can you actually package wine in a residence legally in your state? Here, the farm winery rules allow production on premise but the fermentation and packaging area must be sperate from the home.

[Hamacher]

Any other thoughts?

Happy New Year.... Any one else have any thoughts?

[solomon]

Happy New Year.... Any one else have any thoughts?

Relying upon the Code would be adequate. Regarding using part of a residence for business purposes for regular and exclusive use, §280A(c)(1) is quite clear.

(A) as the principal place of business for any trade or business of the taxpayer,

(B) as a place of business which is used by patients, clients, or customers in meeting or dealing with the taxpayer in the normal course of his trade or business, or

(C) in the case of a separate structure which is not attached to the dwelling unit, in connection with the taxpayer’s trade or business.

As you describe it, the TP could rely upon (A) or (B). The Code does not discriminate against someone in the wine business.

Finally, non-qualified use is not a factor.