Question by Dead: How do we pay back first time home buyer tax credit?
My wife and I purchased a home in Nov. 2009 and began financing it through the owners. In March of 2010, we received the 00 First time home buyer tax credit. Since then, we had to relocate to the opposite side of the state for my job in September 2010. We offered the option to sell the house, but the people we were financing the house through decided it would be best to do a “Deed in lieu of foreclosure” instead. Since the house stopped being our primary residence, I am aware that we will have to pay back the 00 tax credit, but how should we do this? Will we be allowed to pay it back over time? According to Turbo Tax, we were supposed to have received a 1099-C from the people that we were financing the house through, but we never received one and they do not think that they owe us one. Since this was an owner financing, do the same rules apply had we financed traditionally through a bank? Any help is greatly appreciated!!
For more specific detail…. we purchased the home for 9,000 in November 2009. When it came time to relocate, we received three different market analysis’ on the house. The selling price ranged from ,000 to ,000. The maximum list price cap would have been ,425. Therefore, a loss of ,575 and the reason for the Deed in lieu of foreclosure. Our AGI for this year is approx. ,000. Thanks again for your help!
Best answer:
Answer by the tax lady
1. Yes, you have to acknowledge this. Use 1040 and form 5405.
2. You have to calculate the “sales price” of the home. Since this was seller financed and you were foreclosed on, your seller needs to tell you the fair market value he used when he took the house back. Since he’s not a bank, he won’t issue the 1099-A or a 1099-C.
If you bought at 0,000 and he uses 0,000 (or more) as the value, you owe the entire 00 back to the IRS and won’t owe him anything.
If you bought at 0,000 and he uses ,000 (or less) as the value, you won’t owe anything to the IRS, but could still owe him the difference, depending on the contract and state law.
If you bought at 0,000 and he uses something between ,000 and 0,000 you will owe some money to the IRS.
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