Discussion Archives:First Time Home Buyer Credit and Payback?

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Discussion Forum Index --> Advanced Tax Questions --> First Time Home Buyer Credit and Payback?


Discussion Forum Index --> Tax Questions --> First Time Home Buyer Credit and Payback?

Rickcpa1 (talk|edits) said:

21 June 2012
Have a person stopped in out of the blue, not a client, that got a first time home buyer credit. The house had Chinese Drywall and the TP family could not live there. They eventually did a short sale on the house.

TP got the $8000 credit so has to pay the $8000 back. I could not see any exceptions to having to pay the $8000 back but figured I'd ask you.

Any ideas?

Ckenefick (talk|edits) said:

21 June 2012
There's a recaputure limitation based on the level of gain.

Tax Writer (talk|edits) said:

21 June 2012
There's also an exception to the recapture for involuntary conversions. I know about the Chinese drywall issue--it makes the home unsafe to occupy, as the product emits high amounts of sulfur gas. The IRS has categorized the the damage from imported drywall as “casualty loss”, so therefore the involuntary conversion rules and casualty loss rules apply. Not sure if the homeowner spent their own money to try and remedy the problem, or if there's any insurance monies involved.

DaveFogel (talk|edits) said:

21 June 2012
If the clients sold the property in a short sale, then it's likely that the sale resulted in a loss, which means no recapture. See IRC §36(f)(3). That's what Ckenefick was saying in his post, above.

Rickcpa1 (talk|edits) said:

21 June 2012
Thank you all.
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