Grant Part of Basis?

[Randall]

If a person receives a grant (Ameridream program) to help purchase a home, is this part of the person's purchase price for basis purposes or does the grant have to be subtracted? I know logically it wouldn't make sense to include this, but there are some quirky benefits. Settlement statement shows total purchase cost, then the grant as part of the upfront payment.

[jainen]

>>does the grant have to be subtracted?<<

Is Ameridream back? It's been illegal for years because it was a fraudulent way to get around FHA lending requirements. The so-called "grant" was actually funded by the seller who paid a so-called "fee" to the organization. That means the buyer got 100% financing with no down payment or equity, forcing the government to guarantee a high-risk loan. I think you use substance-over-form and reduce the purchase price to what the seller really netted.

[Randall]

This was in 2008. I don't know much about Ameridream myself. I just saw this on the settlement statement. I agree that with the substance over form approach. This amount wasn't paid by the client so it just essentially reduced the cost of the home.