First Time Home Buyer: Recapture of credit

Hello, and thank you in advance for any help you can provide:

Taxpayer bought a home (#1)on 4-22-2010 and took the "long-time homeowner's credit" of $6500 on her 2010 tax return.

She got married, bought a new house(#2), and moved into it on 10/15/2012. She put house #1 up for sale at that time. The house was never condemned, destroyed, etc, and it was not converted to any kind of rental. It is still sitting empty for sale.

I will assume house #1 was her primary residence in 2012 because she lived in it for more than 1/2 of the year, therefore no Form 5405 or recapture is due on her 2012 return. (Working on the 2012 return now, it is under extension). Would you agree?

Another assumption: If she sells the house in 2013, then she will only need to pay back the amount of credit equal to any capital gain she may have on the sale (but not more than the $6500). If she sells the house at a loss, she does not have to pay back anything. Would you agree?

Big Question: What happens if she does not sell the house in 2013? It is no longer her primary residence, and it did not sell. Everything I look at, indicates the entire $6500 is due with her 2013 tax return!

If she later sells the house at a gain of less than $6500 or a loss, there is not way to recover any of the repaid credit???

Reply to
mammondee
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Yes I agree, because of the number of nights rule.

Yes, as long as the calculation for gain or loss uses the adjusted cost basis (your cost basis less the amount of the credit) for computing gain or loss. See Form 5405.

True.

True. It is a hard and fast 36 month rule.

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Reply to
Alan

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