Divorce and FTHBC

[Golden Rocket]

Any cites available for a situation where the $7500 was taken in 2008 and spent by both spouses, then divorced. Husband gave wife a quitclaim deed to the house, but actually spent most of refund money.

In 2010, the repayment over 15 years begins. Who has to pay the $500? $250 each??

[Koss]

Repayment

Short answer: She gets screwed. He got the money, but that doesn't matter. Because she got the house, she has to repay the entire amount of the credit.

Blame her lawyer for not addressing this issue in the property settlement.

In theory, she might actually have a malpractice claim against her own divorce attorney for something like this. If he didn't review their tax returns, he was clearly not doing his job. If he reviewed but them didn't understand the impact on her, then he's not a qualified divorce attorney, and he shouldn't have accepted her case. If he understood the impact, but failed to explain it to her, then again, he wasn't doing his job.

In practice, she won't find another lawyer to take the case against the first guy. She could try filing a professional complaint against the attorney at the bar association, but they can't award any money to her...

He might give her some money to settle the matter and make the professional complaint go away.

The following text is from the instructions for Form 5405:

Part IV. Repayment of Credit Claimed for 2008 or 2009

If you purchased the home in 2008 and you owned it and used it as your main home during all of 2010, you must begin repaying the credit with your 2010 tax return. See the instructions for line 16b.

If you are required to repay the credit because you disposed of a home you purchased in 2008 or 2009 or that home ceased to be your main home, you generally must repay the entire credit with your 2010 tax return. An exception applies if your home was destroyed, condemned, or disposed of under threat of condemnation, and you did not acquire a new main home within 2 years of the event. (See the instructions for line 13g earlier.) Another exception applies for certain members of the uniformed services or Foreign Service or employees of the intelligence community (see the instructions for line 12 on page 4).

Line 14. If you claimed the credit on a joint return for 2008 or 2009 but your spouse died, enter one-half of the credit you claimed on Form 5405 for 2008 or 2009. The remaining half (that is, your spouse's half) does not have to be repaid. If you and your spouse claimed the credit for 2008 or 2009 and the home was later transferred to you by your spouse or ex-spouse as part of a divorce settlement, enter the total credit claimed for 2008 or 2009 by both you and your spouse (or ex-spouse).

BMK