Steve M Posted September 4, 2009 Report Share Posted September 4, 2009 Client is a single male who purchased his house last week. The bank would not finance him without his parents being on the loan. However, he is telling me that his parents are also on the deed (required by the bank) even though they live in their own home. Does that mean that he can only claim 1/2 the new home buyer's credit? That is what I think will happen, but wanted to get another opinion from someone else. Appreciate your thoughts. stevem Quote Link to comment Share on other sites More sharing options...
kcjenkins Posted September 4, 2009 Report Share Posted September 4, 2009 Your client is OK. Here is what the IRS says about co-owners: If two or more unmarried individuals purchase a principal residence, the credit may be allocated among these individuals in any reasonable manner. A method is reasonable if it does not allocate any portion of the credit to a co-owner who is not eligible to claim that portion of the credit. Reasonable methods include allocating the credit based on the taxpayer's contributions towards the purchase price of a residence as tenants in common or joint tenants, or allocating the credit based on the taxpayers' ownership interests in a residence as tenants in common. If an individual is eligible to claim the entire allowable credit, it is also reasonable to allocate the entire credit to that individual. Notice 2009-12, 2009-6 I.R.B. 446. EXAMPLE 1: Dan contributes $45,000 and Brian contributes $15,000 towards the $60,000 purchase price of a residence, with each owning a one-half interest in the residence as tenants in common. The allowable first-time homebuyer credit is limited to $6,000 (10 percent of the purchase price). One reasonable method to allocate the credit would be to divide the credit based on their contributions to the purchase price: $4,500 to Dan and $1,500 to Brian. Another reasonable method would be for Dan and Brian to divide the credit based on their ownership interests, with each claiming $3,000 of the credit. If Dan is ineligible to claim the credit because he is not a first-time homebuyer, it may be reasonable to allocate the entire $6,000 credit to Brian. EXAMPLE 2: Jillian contributes $75,000 and Krista contributes $25,000 towards the $100,000 purchase price of a residence, with each owning a one-half interest in the residence as tenants in common. Jillian's modified AGI is $100,000 and Krista's modified AGI is $60,000. Because Jillian's modified AGI exceeds the $95,000 cap, any portion of the credit allocated to Jillian would be reduced to $0. However, Jillian and Krista may allocate the entire $7,500 credit to Krista. Quote Link to comment Share on other sites More sharing options...
Steve M Posted September 6, 2009 Author Report Share Posted September 6, 2009 Thank you KC for your response. I saw the "reasonable" in the rules, but felt it was too good to be true. But what you said makes sense. Thank you again. Steve M Your client is OK. Here is what the IRS says about co-owners: If two or more unmarried individuals purchase a principal residence, the credit may be allocated among these individuals in any reasonable manner. A method is reasonable if it does not allocate any portion of the credit to a co-owner who is not eligible to claim that portion of the credit. Reasonable methods include allocating the credit based on the taxpayer's contributions towards the purchase price of a residence as tenants in common or joint tenants, or allocating the credit based on the taxpayers' ownership interests in a residence as tenants in common. If an individual is eligible to claim the entire allowable credit, it is also reasonable to allocate the entire credit to that individual. Notice 2009-12, 2009-6 I.R.B. 446. EXAMPLE 1: Dan contributes $45,000 and Brian contributes $15,000 towards the $60,000 purchase price of a residence, with each owning a one-half interest in the residence as tenants in common. The allowable first-time homebuyer credit is limited to $6,000 (10 percent of the purchase price). One reasonable method to allocate the credit would be to divide the credit based on their contributions to the purchase price: $4,500 to Dan and $1,500 to Brian. Another reasonable method would be for Dan and Brian to divide the credit based on their ownership interests, with each claiming $3,000 of the credit. If Dan is ineligible to claim the credit because he is not a first-time homebuyer, it may be reasonable to allocate the entire $6,000 credit to Brian. EXAMPLE 2: Jillian contributes $75,000 and Krista contributes $25,000 towards the $100,000 purchase price of a residence, with each owning a one-half interest in the residence as tenants in common. Jillian's modified AGI is $100,000 and Krista's modified AGI is $60,000. Because Jillian's modified AGI exceeds the $95,000 cap, any portion of the credit allocated to Jillian would be reduced to $0. However, Jillian and Krista may allocate the entire $7,500 credit to Krista. Quote Link to comment Share on other sites More sharing options...
kcjenkins Posted September 8, 2009 Report Share Posted September 8, 2009 You're welcome. Once in a while the Code does make sense. Quote Link to comment Share on other sites More sharing options...
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