Trnr395 Posted December 15, 2009 Report Share Posted December 15, 2009 Homebuyer Tax Credit I know the rule regarding building a house or having a contractor build the house the closing date of the house is considered the date that you first move into the house. And the date for this $6500 tax credit needs to fall between Nov. 6th & June 30, 2010. But what about a prefab house. Is it any different. I have a client that purchased a prefab which was delivered and set up. They didn't get the keys to the house or could move into the house until after Nov. 6. The actual closing with the bank was before this date obviously. Would they be able to claim this credit because I don't see how this is any different than having a contractor build a new house?? Thanks Brad Quote Link to comment Share on other sites More sharing options...
jainen Posted December 16, 2009 Report Share Posted December 16, 2009 >>They didn't get the keys to the house or could move into the house until after Nov. 6.<< According to the definition of "Purchase" in code section 36, "A residence which is constructed by the taxpayer shall be treated as purchased by the taxpayer on the date the taxpayer first occupies such residence." Quote Link to comment Share on other sites More sharing options...
Pacun Posted December 16, 2009 Report Share Posted December 16, 2009 I guess your answer or opinion is that they do not qualify for the credit, correct? Quote Link to comment Share on other sites More sharing options...
jainen Posted December 16, 2009 Report Share Posted December 16, 2009 >>your answer or opinion<< I simply quoted the code section, without expressing an opinion as to how it would apply to the original post. Quote Link to comment Share on other sites More sharing options...
Trnr395 Posted December 17, 2009 Author Report Share Posted December 17, 2009 >>your answer or opinion<< I simply quoted the code section, without expressing an opinion as to how it would apply to the original post. Based on the definition of "purchase" they would qualify wouldn't they. There isn't really a definite answer to this. I keep going back and forth with my opinion with this. Basically would buying a prefab. home be the same as having a contractor build you house and the date that it was finished and you could move into the home would be "based on the definition" the date of purchase?? Anybody else feel this way??? Quote Link to comment Share on other sites More sharing options...
TAXBILLY Posted December 17, 2009 Report Share Posted December 17, 2009 Homebuyer Tax Credit I know the rule regarding building a house or having a contractor build the house the closing date of the house is considered the date that you first move into the house. And the date for this $6500 tax credit needs to fall between Nov. 6th & June 30, 2010. But what about a prefab house. Is it any different. I have a client that purchased a prefab which was delivered and set up. They didn't get the keys to the house or could move into the house until after Nov. 6. The actual closing with the bank was before this date obviously. Would they be able to claim this credit because I don't see how this is any different than having a contractor build a new house?? Thanks Brad On what date did the client purchase the pre fab? taxbilly Quote Link to comment Share on other sites More sharing options...
Trnr395 Posted December 17, 2009 Author Report Share Posted December 17, 2009 On what date did the client purchase the pre fab? taxbilly They purchased the prefab before the Nov. 6th date, but the house was delivered after Nov. 6th. I know this would generally be the purchase date but how is this different than hiring a contractor to build you a stick built home and the purchase date be changed to the date of the house actually being finished and you moved in. Just a thought... Brad Quote Link to comment Share on other sites More sharing options...
Pacun Posted December 17, 2009 Report Share Posted December 17, 2009 I am just going to air my opinion so your post gets more replies. My opinion is that they do not qualify for the credit because the date on the purchase receipt (which for prefab fixed houses is called HUD-1) is the only date that matters. As you know, if you want to purchase a house in your block, that house is a prefab house, some of them were prefab in the 70's. So I don't see the difference. Let's say that someone bought a regular/fixed house in October 2009. The HUD-1 has the closing date in October 2009. TP gets the keys and before moving in he requested minor repairs from the seller, they agree and it takes about 2 weeks for the repairs to complete. Tax payer moves to his newly purchased house in November 10, 2009. I think the IRS will only take the date on the purchase papers and not the date tp actually moved in. Quote Link to comment Share on other sites More sharing options...
Lion EA Posted December 17, 2009 Report Share Posted December 17, 2009 Don't have this situation, but I remember something about a certificate of occupancy for a home being constructed. Worth researching since you're close to the new date! Quote Link to comment Share on other sites More sharing options...
TAXBILLY Posted December 17, 2009 Report Share Posted December 17, 2009 The requirement is that you must buy, or enter into a binding contract to buy, the replacement principal residence after Nov. 6, 2009, and on or before April 30, 2010, and close on the home by June 30, 2010. Home was purchased prior to November 7th and therefore doesn't qualify. taxbilly Quote Link to comment Share on other sites More sharing options...
jainen Posted December 17, 2009 Report Share Posted December 17, 2009 >>Home was purchased prior to November 7th and therefore doesn't qualify.<< NOW I will express an opinion. I challenge anyone to cite some authority supporting what Taxbilly just wrote. The code section I QUOTED above clearly states the date of occupancy is considered to be the date purchased. Quote Link to comment Share on other sites More sharing options...
Pacun Posted December 17, 2009 Report Share Posted December 17, 2009 Let me rephrase the question... Is this a house that the TP built based on the IRS definition or it is a house that was purchase new or used? If we agree that he built this house, then he qualifies for the credit, if not, then he doesn't. Quote Link to comment Share on other sites More sharing options...
OldJack Posted December 17, 2009 Report Share Posted December 17, 2009 NOW I will express an opinion. I challenge anyone to cite some authority supporting what Taxbilly just wrote. The code section I QUOTED above clearly states the date of occupancy is considered to be the date purchased. We can't let a challenge go unanswered. I agree with code sec. 36( c)(3)( B ) that says A home "under construction by a taxpayer" is treated as purchased by him on the date he first occupies it. However, I disagree in this case that the homebuyer is constructing this residence as he is only watching delivery. As I understand this case, he has purchased the home under a binding contract and closed at the bank before the law that allows him credit. In looking for a clearer wording I look at Code sec. 36(h) which states the first-time homebuyer tax credit is extended to apply to a principal residence purchased (1) before May 1, 2010; and (2) before July 1, 2010 by a taxpayer who enters into a written binding contract before May 1, 2010, to close on the purchase of the principal residence before July 1, 2010. Nothing in this code is requiring the occupancy of the house that is being built, instead it is based on the closing date for the definition of a completed purchase. Quote Link to comment Share on other sites More sharing options...
OldJack Posted December 17, 2009 Report Share Posted December 17, 2009 Another reason I don't like links without comment is they sometimes don't work. Here, I think, is what taxbilly was referring to: >> Q: I’m already a homeowner. If I buy another home after Nov. 6, 2009, to use as my principal residence, do I have to sell my home to qualify for the homebuyer tax credit? A: No. If you meet all of the requirements for the credit, the law does not require you to sell or otherwise dispose of your current principal residence to qualify for a credit of up to $6,500 when you buy a replacement home to use as your principal residence. The requirements are that you must buy, or enter into a binding contract to buy, the replacement principal residence after Nov. 6, 2009, and on or before April 30, 2010, and close on the home by June 30, 2010. Additionally, you must have lived in the same principal residence for any five-consecutive-year period during the eight-year period that ended on the date the replacement home is purchased. For example, if you bought a home on Nov. 30, 2009, the eight-year period would run from Dec. 1, 2001, through Nov. 30, 2009. (11/17/09) << Quote Link to comment Share on other sites More sharing options...
jainen Posted December 18, 2009 Report Share Posted December 18, 2009 >>he is only watching delivery<< According to the original post, the home was "delivered and set up." Pre-fab isn't actually standard terminology. It usually refers to a modular or panel building that is assembled from major components on a constructed foundation. If it is instead more like a mobile home that is transported intact and simply placed on blocks, I would be less certain. Quote Link to comment Share on other sites More sharing options...
taxguy057 Posted December 18, 2009 Report Share Posted December 18, 2009 There is something in the law that refers to "benefit and burden" of the home being purchased. Apparently, the TP was not allowed to move into the home til after Nov. 6th thus receiving no benefit nor burden of this residence prior to so with all being said in respect to contracts,dates and deadlines, TP should qualify for the credit.... That's my take on it. Please correct if I'm wrong... :scratch_head: Quote Link to comment Share on other sites More sharing options...
mcb39 Posted December 18, 2009 Report Share Posted December 18, 2009 My take on it is that when you purchase this type of home, you are UNABLE to occupy it the day that you receive it. The plumbing, electricity, water and other utilities still need to be connected. This involves plumbing, wiring and etc. Therefore, can this be classified as a purchase or must it be classified as a construction? If it is a construction; which it is to a great extent, then the date of occupancy rules. Having been through this scenario myself, I know there is a lot more to it than just purchasing the pre-built home. It has to be set on either a basement or some type of foundation. The two halves need to be joined and the utilities need to be addressed. It can be several weeks before the house is ready to be occupied. My feeling is that he qualifies for the $6500 new construction credit.; maybe. Quote Link to comment Share on other sites More sharing options...
taxguy057 Posted December 18, 2009 Report Share Posted December 18, 2009 It can be several weeks before the house is ready to be occupied. My feeling is that he qualifies for the $6500 new construction credit.; maybe. Hence, "benefit and burden..." [ Quote Link to comment Share on other sites More sharing options...
OldJack Posted December 18, 2009 Report Share Posted December 18, 2009 >>receiving no benefit nor burden of this residence << >>you are UNABLE to occupy it the day that you receive it<< While all those comments may be true they are irrelevant. Purchase has to do with transfer of ownership or title. In this case title and purchase transferred with the closing documents. The only time the date of occupancy enters into the situation is when the taxpayer is constructing the residence. My opinion is that this taxpayer is not constructing anything. He received legal title (prior to the credit law) for property that had already been constructed by someone else. In my opinion he does not qualify for the credit. Had the closing been after Nov. 6, I would think otherwise. Quote Link to comment Share on other sites More sharing options...
jainen Posted December 18, 2009 Report Share Posted December 18, 2009 >>this taxpayer is not constructing anything.<< In a sense, all construction is modular. The carpenter does not work with logs, but simply assembles pre-formed lumber. The glazier does not construct windows, he just installs standard frames. There is no magic threshhold beyond which the modular units have "already been constructed by someone else." If the walls are stored in a factory warehouse, signing a contract does not constitute a home purchase under Section 36 as quoted above. Quote Link to comment Share on other sites More sharing options...
OldJack Posted December 18, 2009 Report Share Posted December 18, 2009 >> signing a contract does not constitute a home purchase under Section 36 as quoted above. << I fully agree, however, transfer of legal title at the closing is a purchase. So now the only question is was the taxpayer constructing a residence as defined under the code 36? In most contracts for purchase the closing on a home is after the construction. I believe the delay in closing was how the code was written to accommodate construction. Quote Link to comment Share on other sites More sharing options...
Don in Upstate NY Posted December 18, 2009 Report Share Posted December 18, 2009 The closing is normally when the deed is signed over. At least in this area, the deed reads " ... all that parcel of land ... ". It conveys the land, and any real property that happens to be on it at the time. If the prefab house was not yet erected on the land, it would seem that the rules for the construction of a house would be applicable. Quote Link to comment Share on other sites More sharing options...
mcb39 Posted December 18, 2009 Report Share Posted December 18, 2009 Add another scenario. Purchaser pays cash for the modular house.; which is not yet a home. House is set on land which purchaser has owned for several years. In my mind, this is clearly a construction. Just because the house is constructed inside a building and then placed on a piece of land, does not mean it is not a construction. In this case, there would be no transfer of deed or closing. In our case, we could move into the home when the building inspector said that we could. ie; an occupancy permit. Quote Link to comment Share on other sites More sharing options...
Jack from Ohio Posted December 21, 2009 Report Share Posted December 21, 2009 I have a related question. Where is the reg that says that longtime homebuyers credit is only available for homes purchased AFTER Nov. 6, 2009, and BEFORE Apr. 30, 2010? I think I will start a new topic as well... Quote Link to comment Share on other sites More sharing options...
Edward Posted December 21, 2009 Report Share Posted December 21, 2009 Worker, Homeownership, and business assistance Act of 2009 (HR 3548) has the answer to your question regarding the 6500. credit for Long Time Residents. It also has provisions regarding the First Time Ownership purchases. Quote Link to comment Share on other sites More sharing options...
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