mcb39 Posted February 27, 2010 Report Share Posted February 27, 2010 Am sure this has been addressed before, but I cannot find the answer. Four siblings inherit house. One sibling (my client)wants to purchase the house from the other three. She would be a second phase FTHB; meaning that this is not her first purchase of a home. I said that she did not qualify. The original ATX Community board says that she does because siblings are not considered related parties. My question is, What about the 1/4 that she inherited? There is a clear question on the new 5405 which asks, "Did you purchase the home from a related party?" Am I supposed to say NO and let her take the credit? I am so confused at this point that I really need help. Am I overthinking an area that appears dark gray to me? Thanks to anyone who can give me a cite. Quote Link to comment Share on other sites More sharing options...
TAXBILLY Posted February 27, 2010 Report Share Posted February 27, 2010 This is new uncharted ground so it is not too clear. The part about buying from siblings is correct. Your siblings are not your lineal descendants per IRC Sec.36. The problem lies with the inherited part. If your client did not inherit any part of the house she would be home free but I don't believe she can qualify because she did inherit a portion of the house. I think that might disqualify her but it is only my opinion after reading discussions about his on the taxalmanac forum. taxbilly Quote Link to comment Share on other sites More sharing options...
TAXBILLY Posted February 27, 2010 Report Share Posted February 27, 2010 The cite: IRC §36©(3)(A)(ii)(II) taxbilly Quote Link to comment Share on other sites More sharing options...
mcb39 Posted February 28, 2010 Author Report Share Posted February 28, 2010 The cite: IRC §36©(3)(A)(ii)(II) taxbilly Thanks, Bill. You are always there when I need you. I still don't know what to do, but is reassuring that this is not just another FTHB dumb question. Let's hope that someone else has a take on this. If the dad hadn't passed, she would be buying it from him and the no would be definite. The part that bothers me is the 1/4 that she owns. However, she is really just going to be buying the other 3/4. I can't think about this anymore tonight. Quote Link to comment Share on other sites More sharing options...
kcjenkins Posted February 28, 2010 Report Share Posted February 28, 2010 3) Purchase. (A) In general. The term "purchase" means any acquisition, but only if-- (i) the property is not acquired from a person related to the person acquiring such property (or, if married, such individual's spouse), and (ii) the basis of the property in the hands of the person acquiring such property is not determined-- (I) in whole or in part by reference to the adjusted basis of such property in the hands of the person from whom acquired, or (II) under section 1014(a) [iRC Sec. 1014(a)] (relating to property acquired from a decedent). Thus, the inheritance of part makes the entire house not eligible. Quote Link to comment Share on other sites More sharing options...
mcb39 Posted March 1, 2010 Author Report Share Posted March 1, 2010 I am getting nowhere fast with this question and wanted to get it back to the top of the heap. It still bothers me that she owns 1/4 of the house through inheritance,but is purchasing 3/4 of it from her siblings. The credit would only be based on what she is actually purchasing. It just seems to me that there should be a black and white answer to this question instead of dark gray. Any help would be much appreciated. I don't even mind if someone tells me that I am not seeing the forest for the trees. Quote Link to comment Share on other sites More sharing options...
TAXBILLY Posted March 1, 2010 Report Share Posted March 1, 2010 >>The credit would only be based on what she is actually purchasing<< Therin lies the problem. Is she purchasing the living room and one of the bathrooms and one bedroom from the second floor? As to why there is no black and white answer, what in taxes is black and white? Qualifying child, qualifying relative, etc. Round and round we go. taxbilly Quote Link to comment Share on other sites More sharing options...
kcjenkins Posted March 1, 2010 Report Share Posted March 1, 2010 Marilyn, I gave you the black and white answer. You just did not like it. I cited the actual TAX CODE wording, which I will repeat the relevant part here again. (A) In general. The term "purchase" means any acquisition, but only if-- (ii) the basis of the property in the hands of the person acquiring such property is not determined-- (I) in whole or in part by reference to the adjusted basis of such property in the hands of the person from whom acquired, or (II) under section 1014(a) [iRC Sec. 1014(a)] (relating to property acquired from a decedent). It may not "seem fair", because perhaps it is not, but it is the law. That was the way the law was written, so that is what it is. Quote Link to comment Share on other sites More sharing options...
mcb39 Posted March 2, 2010 Author Report Share Posted March 2, 2010 KC....it wasn't that I didn't like your answer. In theory, I totally agreed with it. Another poster on another board was encouraging me to interpret it differently than you did. My mind is pretty much made up, but there is no hurry on this one. They haven't even begun negotiations for the purchase yet. Thank you for the Code cites. Quote Link to comment Share on other sites More sharing options...
kcjenkins Posted March 2, 2010 Report Share Posted March 2, 2010 Well, I just do not see any other way to interpret this one. It's very clear, seems to me. "the basis of the property in the hands of the person acquiring such property is not determined-- (I) in whole or in part under section 1014(a) [iRC Sec. 1014(a)] (relating to property acquired from a decedent)" Her basis IS determined, in part, under IRC § 1014(a), therefore, she's out of luck on this one. Quote Link to comment Share on other sites More sharing options...
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