question about homebuyer's tax credit?

Question

here is the scenario.... couple [A] buys a house for $250,000 but they couldnt afford that much so another couple-B [ family ] contributed toward the purchase,but will not live there....each couple contributed $125,000.. the title to the home lists each couple as owning 50% of the home..couple-A  took out a home equity loan on their previous house + savings to come up with their $125,000... there previous house sold about 2 months later and the home equity loan was paid off at that time for the previous house that they occupied for several years.....now tax time is here and there is a question as to whether couple A qualifies for the homebuyers tax credit...there tax preparer says they do because they occupy the new house and the old house that they lived in for several years sold shortly after buying the new house,,so that there is no question about there actually occupying the new house..............the question is this.....does couple A qualify fully for the homebuyers tax credit [ not 1st time credit of $8000,,just the regular credit of $6500 ] ?? or do they only qualify for 1/2 of that credit since they only own 1/2 of the new house??..or do they NOT qualify because of only owning 1/2 of the house??..the other question is this.....IF couple A does qualify fully for the $6500 tax credit,,should couple A give 1/2 of that to couple B ??...couple B thinks they should get 1/2 of couple A's $6500 tax refund [ if it goes through],,,couple A isnt sure what the right thing to do is.....obviously couple B doesnt qualify for a tax credit on there own taxes because they will continue to live at their own house,,they will not be occupying the new house at all.......couple A likely will buy out couple B's 1/2 of the new house in a few years for 1/2 of the appraised value at that time....couple B doesnt claim any legal right to the money,,they just think they should be given 1/2 of the $6500 because they purchased 1/2 of the new house that couple A could not otherwise have afforded...any opinions???

becky · Accepted Answer

I looked on the IRS website, and I found the following Q&A under "First-Time Homebuyer Credit Questions and Answers: Homes Purchased in 2009 or 2010":

Q. How does the allocation provision work when unmarried taxpayers purchase a home together and both qualify for the first-time homebuyer credit under different tests? 

A. Co-purchasers who are not married may allocate the credit using a reasonable method. A reasonable method is any method that does not allocate any portion of the credit to a taxpayer who is not eligible for that portion of the credit. The maximum credit for a taxpayer who qualifies under the long-time resident test is $6,500, and the maximum credit for a taxpayer who qualifies under the first-time homebuyer test is $8,000. One example of a reasonable method is to allocate $6,500 to the long-time resident homebuyer and $1,500 to the first-time homebuyer. (12/14/09)

My interpretation of this is that couple A can claim the entire credit, since couple B does not qualify for any of it. If couple A then wants to give part of the credit to couple B as a thanks for helping them out, that would be their choice. I would hope that the two couples can work out something that is satisfactory to all; you said they are family, and I'd hate family to fall out over something like this.

Bash Limpbutt&#39;s Oozing Cyst© · Answer

Couple A may qualify for the $6,500 credit if they owned and lived in their previous home for at least 5 full continuous years out of the past 8.

Couple B does not qualify for anything since they are not living in the new home.

Couple A may claim the full credit if they otherwise qualify.  They do not owe couple B anything legally, however they may wish to do something nice for them for their assistance.

Comment:  Since couple A is buying over their heads the likelihood of trouble in the future is high.  This will leave couple B holding the bag if couple A defaults.  At least couple B has their names on the deed...

Beverly S · Answer

Couple A will not qualify for the $8000.00 because they owned the previous home so they are not first time homebuyers.  Couple A might qualify for the $6500.00 if the purchase took place during the time frame that was available.  Couple B has no legal rights and would not win in court but couple A should (in my opinion) morally share the tax credit.

? · Answer

Sorry, however the exception for interest relocation is limited to lively accountability protection tension and specific government workers. Assuming you do not fall into the two of those categories, in case you progression simply by fact of a job relocation you will could pay off the credit.

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question about homebuyer's tax credit?

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