Possi Posted March 14, 2018 Report Share Posted March 14, 2018 My new client said it was a shame that he was still paying back the First Time Homeowner Credit since he hasn't lived in that house for 2 years. The house had mold so the bank bought it back from him, and they had to move. Doesn't this qualify as an exception to paying the loan back? I don't know that the house was "condemned" but it was a sick house and that was confirmed. If not, then they should have paid it all back the year it was SOLD, or "returned" to the bank, and that will be an issue! I think black mold will qualify them, but want to see what y'all think. I found this: Exceptions. The following are exceptions to the repayment rule for homes that were destroyed or sold through condemnation or under threat of condemnation. If the home is destroyed or you sell the home through condemnation or under threat of condemnation, you don't have to repay the credit if you purchase a new main home within 2 years of the event and you own and use it as your main home during the remainder of the 36-month period. Under this exception, you must purchase a new main home even if the 2-year period ends after the end of the 36-month period. Also, there is no holding period for the new main home if you purchase it after the end of the 36-month period. Quote Link to comment Share on other sites More sharing options...
Possi Posted March 14, 2018 Author Report Share Posted March 14, 2018 Update: I just spoke to the client, and the house had black mold. The bank paid my client $3500 to move out. He doesn't know if the house was condemned or not in the end. This happened in 2013 and they have been doing their own taxes and paying this back all along. Quote Link to comment Share on other sites More sharing options...
BulldogTom Posted March 14, 2018 Report Share Posted March 14, 2018 I think you are on to something there.... I would look for court cases or regulations to support that position. It looks like there was definitely a threat of condemnation, and the fact pattern may fit with regs. Tom Modesto, CA 2 Quote Link to comment Share on other sites More sharing options...
Lion EA Posted March 14, 2018 Report Share Posted March 14, 2018 I don't have any of these, but when you dispose of the residence before paying it all back, aren't you liable only for the remaining payback -- up to the profit from the sale? Your client probably had no profit. Do research it. You might be a real hero if you can get them refunds from amendments in the off season. 3 Quote Link to comment Share on other sites More sharing options...
Possi Posted March 14, 2018 Author Report Share Posted March 14, 2018 2 hours ago, Lion EA said: I don't have any of these, but when you dispose of the residence before paying it all back, aren't you liable only for the remaining payback -- up to the profit from the sale? Your client probably had no profit. Do research it. You might be a real hero if you can get them refunds from amendments in the off season. Another client just came in who lived in the house for 1 1/2 years before he got divorced. The house was eventually foreclosed on and he is still paying it back. I looked at the exceptions for him, but it is my understanding that since he didn't live there for 3 years, he has to keep paying it back. HE probably needed to pay it all upon foreclosure, so I'm going to research this "up to the profit" section and see what it says. I can't believe I have 2 of these. 2 Quote Link to comment Share on other sites More sharing options...
Catherine Posted March 15, 2018 Report Share Posted March 15, 2018 3 hours ago, Possi said: I can't believe I have 2 of these. Neither can WE! (Good luck.) 1 Quote Link to comment Share on other sites More sharing options...
Possi Posted March 15, 2018 Author Report Share Posted March 15, 2018 Part III line 9 asks for the selling price of the home, insurance proceeds, or condemnation award and I have no clue what to enter. On the foreclosure, what would the "selling price" of the house be if it was foreclosed upon? This was in 2009 and he doesn't have any records of the foreclosure. I wasn't his tax preparer back then, so I have no records, either. And with the black mold, there isn't a selling price, either. The bank paid them to leave, but only $3500. Is that a "condemnation award?" Quote Link to comment Share on other sites More sharing options...
Gail in Virginia Posted March 15, 2018 Report Share Posted March 15, 2018 11 hours ago, Possi said: Part III line 9 asks for the selling price of the home, insurance proceeds, or condemnation award and I have no clue what to enter. On the foreclosure, what would the "selling price" of the house be if it was foreclosed upon? This was in 2009 and he doesn't have any records of the foreclosure. I wasn't his tax preparer back then, so I have no records, either. And with the black mold, there isn't a selling price, either. The bank paid them to leave, but only $3500. Is that a "condemnation award?" I would think that the selling price would be the amount of debt that was cancelled in both cases, and yes the $3500 is probably a condemnation award. The tricky part will be finding out exactly how much debt was cancelled. Quote Link to comment Share on other sites More sharing options...
Possi Posted March 15, 2018 Author Report Share Posted March 15, 2018 4 hours ago, Gail in Virginia said: I would think that the selling price would be the amount of debt that was cancelled in both cases, and yes the $3500 is probably a condemnation award. The tricky part will be finding out exactly how much debt was cancelled. I will never be able to get that information. I bet a million that they don't even know how much they paid for the properties, either client. UGH Maybe they can come in pretty close. Quote Link to comment Share on other sites More sharing options...
Lion EA Posted March 15, 2018 Report Share Posted March 15, 2018 Did you get transcripts of those prior years? Was there a Form 1099-A? Quote Link to comment Share on other sites More sharing options...
BulldogTom Posted March 15, 2018 Report Share Posted March 15, 2018 39 minutes ago, Possi said: I will never be able to get that information. I bet a million that they don't even know how much they paid for the properties, either client. UGH Maybe they can come in pretty close. You could try running the property through one of the realtor sites. I think it is Zillow (could be Redfin or Realtor.com) will show a history of the properties including sale dates and amounts when the property has changed hands in the past. Type in the address to the properties on those sites and see if it will make your life a little easier. Tom Modesto, CA 3 Quote Link to comment Share on other sites More sharing options...
Possi Posted March 15, 2018 Author Report Share Posted March 15, 2018 49 minutes ago, Lion EA said: Did you get transcripts of those prior years? Was there a Form 1099-A? No, I didn't. Thanks, I didn't even think of that. Quote Link to comment Share on other sites More sharing options...
Catherine Posted March 15, 2018 Report Share Posted March 15, 2018 5 hours ago, Possi said: I bet a million that they don't even know how much they paid for the properties, either client. Try Zillow. It lists prior sales. Also town or county online records would have that. All you need is the property address to search on. (And I posted this after reading your post, Possi, before seeing that Bulldog Tom had a similar response.) 1 Quote Link to comment Share on other sites More sharing options...
Edsel Posted March 16, 2018 Report Share Posted March 16, 2018 Won't be able to address the above situation, but will use the opportunity to run my mouth. I had about a half dozen clients who took advantage of the $7500 loan back in 2008. In every single case it turned out to be a curse and not a bonanza. The first thing that happened for a couple of them was less than a month later, the govt came out in 2009 with an $8000 payment that didn't even have to be paid back. My people wanted to bite a 10-penny nail half into. Divorce. Actually had a couple couples who thought getting a new house would make them happier and solve their marital problems. I'm not a marriage counselor but solutions for anything need to go to the root of the problem. Getting a new house just gave them something else to fight about. House ends up on the market (in a depressed economy) and the $7500 just becomes another debt to have to deal with. Bad economy. The end of 2008 was a horrible economy, and the $7500 just subsidized a home that was hardly worth the amount of debt. A couple more of my clients lost their job and had to move. Often not being able to sell the house meant converting it to rental property since two house payments were physically impossible to make. There is always the didactic axiom to beware of something throwing money at a situation too good to be true. From old fogies - advice unsolicited is usually unappreciated. If I'm still alive in 2024 when the last of these $500 installments have to be paid back, I will be quite happy to see form 5405 arrived at a much-welcomed demise. 3 Quote Link to comment Share on other sites More sharing options...
Possi Posted March 16, 2018 Author Report Share Posted March 16, 2018 I'm getting the addresses and dates, and will try Zillow. 1 Quote Link to comment Share on other sites More sharing options...
Catherine Posted March 16, 2018 Report Share Posted March 16, 2018 Good luck, @Possi! 1 Quote Link to comment Share on other sites More sharing options...
Possi Posted March 22, 2018 Author Report Share Posted March 22, 2018 On the foreclosure, he found the Zillow listing. 8-5-2008 it says it was sold for 206,000. That was his purchase. 9-27-2010 foreclosed to lender and price listed on Zillow was $211,690. Not sure if that was the debt cancelled or not. So, was that considered a gain? I just don't "get it." 5-6-2-11 was the next sale, and it was only 120,800. Quote Link to comment Share on other sites More sharing options...
Gail in Virginia Posted March 22, 2018 Report Share Posted March 22, 2018 1 hour ago, Possi said: On the foreclosure, he found the Zillow listing. 8-5-2008 it says it was sold for 206,000. That was his purchase. 9-27-2010 foreclosed to lender and price listed on Zillow was $211,690. Not sure if that was the debt cancelled or not. So, was that considered a gain? I just don't "get it." 5-6-2-11 was the next sale, and it was only 120,800. Did your client get a 1099-C and/or 1099-A for the year of foreclosure? You might want to have him request IRS transcripts for those years to see if anything was reported to them as cancelled debt or foreclosure on mortgage if he doesn't have the paperwork. Quote Link to comment Share on other sites More sharing options...
Possi Posted March 22, 2018 Author Report Share Posted March 22, 2018 43 minutes ago, Gail in Virginia said: Did your client get a 1099-C and/or 1099-A for the year of foreclosure? You might want to have him request IRS transcripts for those years to see if anything was reported to them as cancelled debt or foreclosure on mortgage if he doesn't have the paperwork. No, he didn't get one. I asked him to do that but it's beyond him, I think. And time is ticking. Is the Zillow helpful in determining the value at all? It was practically given away when it finally sold. I'm sick to think he might have had to pay that back all those years ago. He was broke and broken. He still doesn't own anything. Quote Link to comment Share on other sites More sharing options...
Catherine Posted March 22, 2018 Report Share Posted March 22, 2018 Not too long after the foreclosure for the next sale. It's not too distant (especially considering the long delays buying a foreclosure house) and so you can make a VERY strong case that THAT was the fair market value. So he was definitely underwater and so no gain. 2 Quote Link to comment Share on other sites More sharing options...
Possi Posted March 24, 2018 Author Report Share Posted March 24, 2018 Thanks for all your help on this! 1 Quote Link to comment Share on other sites More sharing options...
JohnH Posted March 24, 2018 Report Share Posted March 24, 2018 Have you looked at the county assessor's web site to get a history of the property? I took a quick look at a VA county for example (Fairfax), and it was chock full of information. Once you identify the property and go to the property card, there is a menu at the top left quadrant with a complete history. It listed annual tax assessments and dates & amounts of sale, for example. Don't know if all VA counties are in the data base, but it would be a great source of supporting documentation. In my state (NC), I've gotten in the habit of checking the real estate lookup for missing info on a routine basis. I often use it to get missing property tax payment dates, amounts, etc rather than waiting for the client to provide it. Plus, when there's a purchase or sale of a rental property I routinely pull the property card and print out the info as supporting documentation for purchase/sale dates, calculating land value, etc. 1 Quote Link to comment Share on other sites More sharing options...
Possi Posted March 24, 2018 Author Report Share Posted March 24, 2018 The client is a police officer and he knew all about looking up the property! LOL I could use HIM in my business! The other client with the black mold in the house is the one I will do next. He's coming up on the roster today. He has also been paying back for several years after he was forced to leave the property. The bank paid him about $3k to move out. I'm confident I'll set him free, too. He has been doing his own return. New to me. 1 Quote Link to comment Share on other sites More sharing options...
Recommended Posts
Join the conversation
You can post now and register later. If you have an account, sign in now to post with your account.