Home Buyers Credit - requirements and applicability

[SunTaxMan]

As I read some of the details about the new Home Buyers Credit, I find:

1. It applies to taxpayers who have not owned a "principal residence" in the last 3 years, prior to this RE purchase.

2. The taxpayer must own the property for at least three years.

What I don't see is a requirement that the RE purchased (and used as a basis of this "home buyers' credit") needs to be the "primary" residence of the taxpayer for the required three year minimum ownership.

This leads me to a question a client just asked me. He has not "owned" a principal residence for over three years (they are "renting" in an independent living facility.). Can he buy a home and claim the credit without USING that home as a residence? (primary or secondary -- can he use it as a rental property?)

The answer to this question would seem to be very obvious - No - that the purchased home on which the credit is claimed must be used for three years as a principal residence (by the taxpayer{s} claiming the credit), not just owned, but I don't see this in the information I have been reading.

Is this a "loophole" in the law? Or am I not reading enough informaiton to discover the "fine print?"

[David1980]

From 5405 instructions,

Who Can Claim the Credit

In general, you can claim the credit if you are a first-time

homebuyer. You are considered a first-time homebuyer if:

c You purchased your main home located in the United

States after April 8, 2008, and before December 1, 2009.

c You (and your spouse if married) did not own any other

main home during the 3-year period ending on the date of

purchase.

It must be a purchase of a "main home" which would prevent them from buying and immediately renting out a home to get the credit. What if they buy it, live in it 2 weeks, and then rent it?

Homes purchased in 2009. You must repay the credit

only if the home ceases to be your main home within the

36-month period beginning on the purchase date.

So what they could do is purchase the home, use it as their primary home for 36 months, and then convert to rental.

[mcb39]

Who Cannot Claim the Credit

(6) If you sell the home, or it ceases to be your main home before the end of 2009

I just happened to be researching this today for a client who asked if she could buy a condo.........

[David]

Also, something I haven't been able to find is how the credit works for a recently married couple when one has owned a home in the last 3 years and the other hasn't owned a home in the last 3 years.

All instructions say the same thing- you AND your spouse did not own any other main home during the 3 year period ending on the date of purchase.

Nothing seems to address my question. It appears that a spouse who hasn't owned a home in the last 3 years is penalized if their spouse has owned a home in the last 3 years. Is this the case?

Or do they get to claim 1/2 of the credit on their joint return?

Thanks.

From 5405 instructions,

Who Can Claim the Credit

In general, you can claim the credit if you are a first-time

homebuyer. You are considered a first-time homebuyer if:

c You purchased your main home located in the United

States after April 8, 2008, and before December 1, 2009.

c You (and your spouse if married) did not own any other

main home during the 3-year period ending on the date of

purchase.

It must be a purchase of a "main home" which would prevent them from buying and immediately renting out a home to get the credit. What if they buy it, live in it 2 weeks, and then rent it?

Homes purchased in 2009. You must repay the credit

only if the home ceases to be your main home within the

36-month period beginning on the purchase date.

So what they could do is purchase the home, use it as their primary home for 36 months, and then convert to rental.

[Lion EA]

Another marriage penalty.