Sale of house - recapture long-time buyer credit?

Taxpayer bought personal residence for $250,000 plus costs, and took long-time homeowner credit. Property was 2 lots, one with house, one without. Basis after credit reduction is $246,162.

9 months later they sold the house and the house lot, (but kept the vacant lot,) for $223,000. I'd guess the lot was worth somewhere between 20-25K FMV. Plus or minus.

How to I figure if they have to give back the credit? If I show ONE DOLLAR LOSS - do I get to keep the whole credit?

Should I get an appraisal of lot kept's value as of the date of sale?

Reply to
Tom C
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1) What loss? One cannot deduct a loss on the sale of a personal residence. 2) As to whether the credit need be paid back, it depends on which year's rules the credit was taken. 3) Appraisal where there's an ACTUAL sale? Why?
Reply to
D. Stussy

He didn't say anything about deducting any loss, just whether or not there was one. I would guess that the requirement to repay the credit depends on the gain.

There were two lots, purchased together, not priced separately. One was sold some time later (presumably the value changed). The other was retained. What was the basis of the one sold?

Seth

Reply to
Seth

As this was the long-time homeowner credit, you have failed the 3 year rule and have to pay back the entire credit in the year the residence either ceased being the main home or was sold. You use IRS Form 5405 for this purpose. See the link below for the IRS explanation.

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Reply to
Alan

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Repayment Rules for Second ($8,000 new homebuyer) and Third Versions ($6,500 long term owner)

If you claimed a credit for a 2009 or 2010 purchase, the 15-year repayment rule doesn?t apply (it only applies to 2008 purchases). But if you sell the home in 2010 or stop using it as your principal residence this year, you?ll generally have to repay the lesser of: (1) the full amount of the credit or (2) your gain on sale (if any). If you have a loss, you don?t have to repay the credit. The earlier example explains how to determine if you have a gain or loss.

Exceptions: For post-2008 purchases, the credit repayment obligation disappears after you?ve owned and used the home as your principal residence for over three years. In addition, the credit repayment exceptions listed for the first version of the credit also apply to the second and third versions.

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Source:

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I will of course check the instructions, but is the WSJ article wrong?

Reply to
Tom C

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The amount to be paid back is the smaller of the gain or the credit. The gain is computed by taking the sales proceeds after expenses and subtracting your adjusted basis. The adjusted basis is your cost basis less the credit you took. This is the case of selling to an unrelated person with a gain and you checked Box 13a on Form 5405. If after making the adjustment to basis, you have a loss on the sale, you check Box 13b and you are done. No credit to pay back. See the worksheet in the 5405 instructions.

Reply to
Alan

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