FTHBC repayment when had to move to nursing home due to dementia?

[nwtaxlady]

My client is in his mid 50's and had taken the FTHBC on his return back in 2008 and was single then. Since then, he got married and has been paying back the $500 credit per year. In Fall of 2015 he was diagnosed with Dementia and moved into a nursing home. So all of 2016 he did not live with his wife. She couldn't make the house payments so she moved out & let it go back to the bank. NO 1099-A or C has been issued yet.

Need help with form 5405. What do I put for the sale amount since there hasn't been a sale?

I am also looking at MFS as he has all his medical expenses and HE took the FTHBC and that would be on his return. Just a thought. But again, how would I fill out the form 5405? or don't until the 1099-A or C is issued?

Any thoughts anyone?

[Roland Slugg]

When a person's own house (or any other real estate) is allowed to go back to the lender via foreclosure or a deed in lieu of foreclosure, it is treated for tax purposes the same as if the property were sold, on the final foreclosure date, for the principal balance owing on the loan(s).

If this results in a loss on the house, the unpaid balance of the FTHBC does not have to be repaid. Just work through F-5405.