Comments on: Housing Credit Bill Survives Debate (Psst, I Still Don’t Like It)

By: Housing Credit Extended – What Else Is New? | taxgirl

Housing Credit Extended – What Else Is New? | taxgirl — Thu, 05 Nov 2009 22:11:23 +0000

[...] Goldman Sachs also estimates that all of that money only resulted in boosting prices by 5% – and that includes the idea that sellers increased their prices in anticipation of the credit, something that I was concerned about (you may recall that I wasn’t a fan of the bill in the first place). [...]

By: Ask the taxgirl: Sellers and Homebuyer’s Credit | taxgirl

Ask the taxgirl: Sellers and Homebuyer’s Credit | taxgirl — Thu, 06 Aug 2009 02:16:18 +0000

[...] think the credit is a real selling point (though I’m not a fan of the concept). It definitely makes sense to advertise it. I just think you have to be careful not to provide [...]

By: Deb

Deb — Wed, 18 Feb 2009 12:20:22 +0000

If you sell your home to a non-relative before you’ve repaid the loan, you’ll only need to repay the loan to the extent of the gain on the sale of your home. If you have a loss, you won’t have to repay the balance of the loan. The amount of the homebuyer credit not repaid will reduce your cost basis. So, be sure to keep all receipts for improvements you make to your home. (This refers to the 2008 credit.)

By: Economic Stimulus Plan Is (Almost) Law: What Made the Cut? | taxgirl

Economic Stimulus Plan Is (Almost) Law: What Made the Cut? | taxgirl — Mon, 16 Feb 2009 16:13:45 +0000

[...] increases the size of the existing temporary, refundable first-time home buyer credit to $8,000 – the Senate version was largely scrapped. The requirement that the credit be paid back over 15 years has been removed; however, if you sell [...]

By: Kelly

Kelly — Wed, 11 Feb 2009 14:17:43 +0000

I agree that the bill is poorly drafted. That’s part of the problem with rushing these things out.

I still think it’s fraud. It wasn’t a bona fide transaction. The first sale was clearly for tax purposes only and not FMV – it’s some kind of loopy step transaction. That’s generally prohibited in the Tax Code. If I were IRS, I’d argue that the entire transaction was one sale for $21,000 – credit limited to $2,100, no loss. I think IRS would prevail.

And there are all kinds of issues related to the original seller. He has a substantial gain in 2008 (not sure of basis but assume it’s less than $21k), not his residence, so not exempt. His loss is artificial.

Of course, notwithstanding that, your clients are “lucky” that they did this on 12/31 – if they had tried in ‘09, they wouldn’t have qualified for the credit because of the resale (in the same tax year). Of course, it’s interesting that they paid the down payment after the “purchase” of the house – not sure if it was considered proper sale on 12/31 (notwithstanding the whole step transaction issue). Wouldn’t have touched this one with a 10 foot pole.

By: Skip McQuaid

Skip McQuaid — Wed, 11 Feb 2009 13:17:23 +0000

It does indeed sound like fraud. However it does not appear to be so. Obviously it is against the “spirit” of the legislation. And our courts have, at their own convenience, sometimes decided that the “spirit” was important and sometimes a “strict reading” is important depending on what they were trying to accomplish. However something is worth what someone will pay for it – as long as it is at arms length (no family member involved) so my question remains – has any law been broken? Certainly the selling of the residence to the same person is suspicious however I have seen folks default on a wrap around mortgage and re-buy the same residence with another down payment a day or so later – in fact, I have a client who seems to specialize in selling wrap around mortgages, having the folks default, and reselling them the same place a day or so later and doing this with amazing regularity. So while it may seem like fraud it appears to me that it may just be taking advantage of a tax law that was obviously written by 3 year olds in about 2 minutes flat.

By: Kelly

Kelly — Wed, 11 Feb 2009 12:14:09 +0000

I dunno, sounds like fraud to me. If the home was worth $21,000, then that should have been the sale price and thus, the credit would have been limited to $2,100. The fact that the home was sold more than once – to the same person – for more than FMV at least once – says to me that the transaction was bogus and was only contemplated for purposes of getting the credit. If the credit increases, I’ll bet we’ll see more of this.

By: Skip McQuaid

Skip McQuaid — Wed, 11 Feb 2009 04:04:36 +0000

A client came in – he sold a house for $75,000 to one of his tenants. A wrap around mortgage deal. Last year and the tenants were in the home on 12/31/08. The tenant filed their return and got the $7,500 rebate. They paid my client $3,750 of it as a down payment on their home. They then sold the home back to my client for $50,000 (a loss). Now they don’t have to repay the loan. The client then sold the house back to the tenant for $21,000 (it’s actual worth, I guess) and subtracted the $3,750 down payment. And it does not appear to me that any laws or rules were broken. Any comments?

By: D

Tue, 10 Feb 2009 20:26:11 +0000

If the credit is non-refundable in the senate version, it doesn’t really help folks on the low end of the totem pole move up to home ownership — where the credit could actually move some people into home ownership who wouldn’t otherwise be there, albeit a modest gain. At least we’d be helping those folks that might not otherwise make it. I think you put your finger on the crux: this is intended to bolster prices, and therefore those who already have the assets. What is the income level for realizing the full $15,000 credit (over two years)? 65,000?

By: Chris

Chris — Tue, 10 Feb 2009 18:45:18 +0000

FOR THOSE WHO BOUGHT IN JANUARY:
THE HOUSE PASSED THE BILL FOR A $7500 TAX CREDIT THAT DOESN’T NEED TO BE REPAID AND IS AFFECTIVE FOR PURCHASES OF HOMES AFTER 01/01/09.
THE SENATE CHANGED IT TO A $15,000 TAX CREDIT BUT IT IS ONLY AFFECTIVE FOR PEOPLE WHO PURCHASES AFTER IT’S SIGNED.
IF THE SENATE PASSES THERE’S TODAY, THEN THERE WILL BE A MEETING BETWEEN MEMBERS OF THE SENATE AND MEMBERS OF THE HOUSE TO WORK OUT THE DIFFERENCES BETWEEN THE 2 BILLS.
I BOUGHT IN JANUARY SO I OBVIOUSLY WANT THE $15,000 TAX CREDIT THE SENATE PROPOSED BUT WITH THE START DATE THE HOUSE PROPOSED.
YOU NEED TO MAKE YOUR VOICE HEARD AND CONTACT YOUR SENATORS AND HOUSE REPRESENTATIVE. THIS IS AMERICA SO YOUR VOICE IS YOUR POWER. E-MAIL THEM OR CALL THEM. HERE IS A CONVENIENT NUMBER. CALL AND ENTER YOU ZIP CODE AND IT WILL GET YOU IN CONTACT WITH ALL OF YOUR CONGRESSMEN. DECISIONS ARE BEING MADE, DO IT NOW. 1-866-924-NAHB (6242)