Long-Time Resident Credit

[LisaAnn]

Is a long-time resident eligible if they purchase a home from a sister or brother?

Taxpayer wants to get the long-time resident credit; he meets all of the criteria except that I need to confirm that purchasing a home from his sister is not considered a related-party for this purpose.

Researched and found documentation in the 5405 instructions:

Who Cannot Claim the Credit

You cannot claim the credit if any of the following apply:

9. You acquired your home from a related person. This includes:

a. Your spouse, ancestors (parents, grandparents, etc.), or lineal descendants (children, grandchildren, etc.).

b. A corporation in which you directly or indirectly own more than 50% in value of the outstanding stock of the corporation.

c. A partnership in which you directly or indirectly own more than 50% of the capital interest or profits interest.

For more information about related persons, see the discussion under Nondeductible Loss in Chapter 2 of Pub. 544, Sales and Other Dispositions of Assets. When determining whether you acquired your main home from a related person, family members in that discussion include only the people mentioned in 9a above.

I checked out the Pub 544-chapter 2 for related-party clarification and it does state that sisters, brothers..whole or half are considered related parties.

BUT............because of the disclaimer in the 5404 instructions:

When determining whether you acquired your main home from a related person, family members in that discussion include only the people mentioned in 9a above.

My conclusion:

Taxpayer would be eligible for the long-time resident.

What do you think? Anyone have this situation before?

Thanks!