Why have you forsaken our home, USA?
April 30, 2009 8:41 AM   Subscribe

Why can't you claim the first-time home buyer tax credit if you've purchased the home from a family member?

I've done a fair amount of googling on the topic, and while I understand the "what", I don't understand the "why". Is this simply an attempt by the government to stave off claims of the tax credit by families who are willing to shuffle ownership of property around in order to fraudulently get free money? I can understand that being the case for the free $8000 that's available in 2009, but not the $7500 for 2008, that ends up being an interest-free loan.
posted by scarykarrey to Work & Money (5 answers total)
 
Yes - if you didn't have this in the law people would absolutely game it. A 7500 dollar interest free loan is worth what ? 375 bucks - that's real money if a million people are willing to commit fraud.
posted by JPD at 8:48 AM on April 30, 2009


Is this simply an attempt by the government to stave off claims of the tax credit by families who are willing to shuffle ownership of property around in order to fraudulently get free money? I can understand that being the case for the free $8000 that's available in 2009, but not the $7500 for 2008, that ends up being an interest-free loan.

That was my assumption. One thing worth noting about the $7500 credit that you have to pay back, is that if you sell the house before you pay it all back and don't make as much in profit as you owe, you don't have to pay back any more than your profit. So if the family member rules weren't there, one family member could sell it to someone else, get the $7500, then later buy it back for a loss (on paper at least) and not have to pay it back.
posted by burnmp3s at 8:48 AM on April 30, 2009


So my sister and I don't sell each other our houses and take the credit.
posted by theora55 at 9:09 AM on April 30, 2009


Yeah--to prevent flipping and swaps and other such subterfuges.

Just as a data point, one of my family members and I spent the better part of a drunken evening planning how best to pull off this scam. Then we found out it was illegal.
posted by box at 9:39 AM on April 30, 2009


I guess I answered it myself, I just needed confirmation. This makes me sad, even though I understand it. Oh well.
posted by scarykarrey at 11:18 AM on April 30, 2009


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