$6500.00 Homebuyers credit

[Philip1117]

Taxpayers owned a home for twenty plus years then in 7/1/08 bought a new home. Sold the new home in 9/1/09. Bought a new home and will close on 12/11/09.

So

1st home: 1/1/70 to 7/1/08 owned a home sold it and bought home 2.

2nd home: 7/1/08 to 9/1/09 owed a home sold it and bought home 3

3rd home: will be purchased on 12/11/09

Does home 3 qualify for 6500 credit. I say no since home 2 was the principle residence and it was not owned 5 out of the last eight years. Any thoughts on the subject.

Thanks

[Pacun]

They don't qualify because they have not lived in the same house for 5 years during the last 8 years.

[Lion EA]

They lived in House 1 for five consecutive years in the eight years prior to the purchase of House 3. Doesn't that qualify them?

[Gail in Virginia]

I am with Lion - as long as home 1 was a principal residence for 5 of the last 8 years, and it seems to have been, why would they not qualify?

[TAXBILLY]

I'm with lion and gailtaxed.

taxbilly

[Pedro]

They lived in House 1 for five consecutive years in the eight years prior to the purchase of House 3. Doesn't that qualify them?

In this case the first house is the second one, They don't qualify

[jainen]

>>since home 2 was the principle residence and it was not owned 5 out of the last eight years<<

Five out of the last eight does not mean the LAST five out of eight. That would be five out of five. You can count any five consecutive years within the eight year window. Therefore home #2 is irrelevant to the question. Suppose they had rented it instead of buying--they would still meet the 5 out of 8 test.

[Pacun]

For sure, if they had moved to rent and NOT buying house number 2, they would have qualified for the credit. Also if they had converted house 1 to rental they would qualify for the credit. But I agree with those who say they qualify for the credit because there is no information to the contrary. My only concern is with the fact that within the last 3 years they have disposed of 2 houses and also bought two houses.

This is a new credit and there is no background information. Also, the IRS is not clear on this type of situation and there are no examples on their website.

[Lion EA]

Q: I’m already a homeowner. If I buy a replacement home after Nov. 6, 2009, to use as my principal residence, do I have to sell my home to qualify for the homebuyer tax credit?

A: If you meet all of the requirements for the credit, the law does not require you to sell or otherwise dispose of your current principal residence to qualify for a credit of up to $6,500 when you buy a replacement home to use as your principal residence. The requirements are that you must buy, or enter into a binding contract to buy, the replacement principal residence after Nov. 6, 2009, and on or before April 30, 2010, and close on the home by June 30, 2010. Additionally, you must have lived in the same principal residence for any five-consecutive-year period during the eight-year period that ended on the date the replacement home is purchased. For example, if you bought a home on Nov. 30, 2009, the eight-year period would run from Dec. 1, 2001, through Nov. 30, 2009. (11/17/09)

[Jack from Ohio]

Does NOT qualify!

[taxguy057]

I agree with old jack! There is a 3 yr. non ownership of a principal residence clause. the taxpayer is disquailfied from the credit if they owned a home and it was their principal residence. now if they were renting home #1 or #2 prior to purchase of #3 then they would. oh yeah and its been extended to july 2010.

am i correct on this jack?

[jainen]

>>the taxpayer is disquailfied from the credit if they owned a home and it was their principal residence<<

Section 36(c )(6) (Exception for long-time residents of same principal residence) says, "In the case of an individual (and, if married, such individual's spouse) who has owned and used the same residence as such individual's principal residence for any 5-consecutive-year period during the 8-year period ending on the date of the purchase of a subsequent principal residence, such individual shall be treated as a first-time homebuyer for purposes of this section with respect to the purchase of such subsequent residence."

While "subsequent" can sometimes be considered as a synonym for "next," it is usually used in the more general sense of "later." So the code doesn't say "THE subsequent principal residence," just "A subsequent principal residence." (And before you ask, NO, that phrase does not contain any plurals.)

[Pacun]

Can we answer the core question, please? Does taxpayer qualify for the $6,500 credit or not?

[Lion EA]

Can we answer the core question, please? Does taxpayer qualify for the $6,500 credit or not?

Yes

[TAXBILLY]

Can we answer the core question, please? Does taxpayer qualify for the $6,500 credit or not?

Yes.

taxbilly

[kcjenkins]

Yes, they qualify.

[Lion EA]

From the NATP e-Newsletter:

You Make the Call

Each week the Tax Knowledge Center will pose a question to you. Please note that the question and answer provided does not take into account all options or circumstances possible. The feature is intended to create some interest and insights into the topic provided. The answer will appear here.

This week's question is brought to you by Sherri Huff, EA, from NATP's Tax Knowledge Center.

December 10, 2009

Question:

If a client meets the criteria to be a long-time resident under §36©(6) wherein the client (and spouse if married) owned the same residence and used it as his or her principal residence for any 5-consecutive years during an 8-year period ending on the date of purchase of the later residence, does it matter when the home being replaced as a principal residence is sold?

Answer:

No. The home could have been sold before or after the purchase of the new principal residence. As a matter of fact, the replacement home need not be sold at all; the taxpayer can keep it as a second home or convert it to rental property, etc. If it is sold before the purchase of the new home, you must keep in mind the rule requiring taxpayers to have lived in the former home for at least 5-consecutive years during the 8-year period ending on the date of purchase of the later residence.