New Homebuyer Credit

[Eli]

Taxpayer purchased a new apartment building (4 apartments). We set them up as rental property depreciating all 4 apartments because he said he was renting all 4. I knew he had a home elsewhere (not under his name). A few days ago he called to say that a 'friend' told him he would qualify for the new homebuyer credit if he lived in one of the apartments. Well he called to say that he's living in one of the apartments & wants to see if he quailifies for the credit. I didn't think he would qualify for the whole amount, but then I saw the following on the IRS website:

Q. I purchased a home that qualifies for the first-time homebuyer credit. I will be renting two of the bedrooms and reporting the rental income on Schedule E. Will I still qualify for the credit if I use the home as my principal residence?

A. Yes, if you meet all first-time homebuyer eligibility requirements. See Form 5405, First-Time Homebuyer Credit, for more details.

I wonder if that would apply as well to an apartment building. Any ideas?

Thanks!!

Eli

[jainen]

>>We set them up as rental property.... he called to say that he's living in one<<

Either he lied to you so you would help him take business deductions he is not eligible for, or he lied to you so you would help him take a credit he is not eligible for. Or both, like as not. Since you KNOW he lies to you, your professional services could never be based on anything more than dishonesty and mistrust. Send his papers back to him.

[Don in Upstate NY]

>>We set them up as rental property.... he called to say that he's living in one<<

Either he lied to you so you would help him take business deductions he is not eligible for, or he lied to you so you would help him take a credit he is not eligible for. Or both, like as not. Since you KNOW he lies to you, your professional services could never be based on anything more than dishonesty and mistrust. Send his papers back to him.

Or, he bought the property as a rental, then found out about the credit, and wants to see if living in it more beneficial than the potential rental profit. Run the numbers for him, assuming that he does in fact qualify as a first-timer. Treat it as three units rental and one personal. He's looking at a return of 10% total over three years, or less if he hits the $8,000 limit.

[Eli]

Or, he bought the property as a rental, then found out about the credit, and wants to see if living in it more beneficial than the potential rental profit. Run the numbers for him, assuming that he does in fact qualify as a first-timer. Treat it as three units rental and one personal. He's looking at a return of 10% total over three years, or less if he hits the $8,000 limit.

Thank you bot for your responses. I guess it's decision time. I will have to schedule him an appt and see what the whole story is.

Thanks again!!

ELi