Form 5405 credit

[mircpa]

I have this question posed to me by a client who bought house in june 2008 claimed $7,500.00 credit on individual tax return, they are subject to repayment of credit begining year 2010 for an amount of $500.00 every year until next 15 years, whereas taxpayers who bought houses in 2009 and stays for 36 months, repayment of loan is waived ? Does anybody knows what rational/logic was behind coming up with such a tax code

[JohnH]

The first mistake is using the words "rational", "logic", and "tax code" in the same sentence.

They just don't go together.

Aside from that, the law is what it is. An interest-free loan of $7,500 for 15 years is not a bad deal, even if someone else got a better deal in 2009. But tell your client to write their congressperson & complain. If enough people who bought in 2008 complain, they may be able to get their loans converted to a gift as well, and they have almost two years to press the point. And if they succeed, tell them they owe all the rest of us a "Thank You" note.

[mircpa]

JohnH

I apologize for improper placement of words. All i was trying is find out what is the essence of drafting such a tax code. Is government trying to promote home buying/money borrowing and if so how is it different from each year, i.e. 2008 or 2009. I am sure this issue is definitely going to be raised by home buyers of 2008

[jainen]

>>what is the essence of drafting such a tax code<<

It was two separate laws--like many tax provisions, it was changed in a later year. In this case it was expanded, but there are plenty of benefits that have been reduced or eliminated. Even for this credit, it gets cut off for purchases before the end of 2009. In my opinion, the fact that the credit terms were changed for other transactions does not change the value of the credit your client was pleased to take advantage of.

[mcb39]

>>what is the essence of drafting such a tax code<<

It was two separate laws--like many tax provisions, it was changed in a later year. In this case it was expanded, but there are plenty of benefits that have been reduced or eliminated. Even for this credit, it gets cut off for purchases before the end of 2009. In my opinion, the fact that the credit terms were changed for other transactions does not change the value of the credit your client was pleased to take advantage of.

Was it not only two separate laws, but also two separate administrations that passed those laws? I'm sure you will correct me if I am wrong on this. I, personally, don't think that it will ever go retroactive. It reminds me of all of the parents who were paying high tuition for their college kids and getting no credit for it. They moaned and groaned when the tuition credits came into play. Nobody ever said it was fair, but the law is the law is the law.

[kcjenkins]

MIR, the purpose of both laws was to encourage and enable people to buy homes, at a time when the housing market was tanking. The first deal was a good one, but since the housing market continued to fall, the next law sweetened the pot. As to going back and changing it, where is the benefit to the economy from that? Think it through. The first credit did enable some new sales, but sweetening it would not do anything except cost the government more money, with no new benefit. It would thus be illogical to change it now. Especially when the housing market is now seeing a bit of an upturn.