Help! First Time HO tax credit.Creative Legal.. - Posted by John WTX

Posted by Edwin on May 18, 2010 at 24:44:03:

No, you were not clear originally, but now I understand. I believe you are correct that a tax credit is not available to transactions between related parties. However, I would suggest this: Sell the property to an unrelated person, then have that person sell to your son. Another option would be to transfer the property into a Trust, with the Trustee being someone with a different last name than yours. From there, have your son buy the property from the Trust. This may violate the IRS rule prohibiting familial transfers, but what are the chances the IRS is going to make the connection? Slim, I think. You’re betting on this going through without much scrutiny. For $8,000, I’d sure take that chance. And, if all else fails, you can always argue that the purchase was from a Trustee and a Trust, and the fact that the benificiary may have been related to your son is immaterial. The IRS won’t like it, but you can certainly make that argument. BTW, you need to have had your purchase agreement signed by May 1st. You did that, right? (wink, wink)

Help! First Time HO tax credit.Creative Legal… - Posted by John WTX

Posted by John WTX on April 25, 2010 at 20:54:49:

We are planning a legitimate home sale to our son, who is a first time home buyer. Has anyone thought of a Creative, Legal way to allow him to take advantage of the tax credit? I understand the reason behind the exemption, but I see no reason why a legitimate buyer should be excluded from the same credit that other non-tax paying people are getting…
Any help or leads would be greatly appreciated.

I am a seasoned creative Investor so I have no problem with complicated scenarios so please don’t hold back.

Thanks in advance for any response!

Re: Help! First Time HO taxes - Posted by Edwin

Posted by Edwin on May 07, 2010 at 14:24:29:

At first I thought you were referring to the exemption that prohibits a sale between related parties, but then you said it was not a sale from you to your son, so apparently there is no exemption to worry about. But once again, your post is so incredibly confusing that I really have no idea what the hell you’re talking about!

First Time HO tax credit.Creative Legal… - Posted by Jack-E

Posted by Jack-E on April 29, 2010 at 16:03:00:

Does the law prohibit loans by parents?

Re: First Time HO tax credit.Creative Legal… - Posted by John_WTX

Posted by John_WTX on April 30, 2010 at 24:55:18:

I don’t know but I do think there is a provision to make
the credit exempt from sales between related parties.

Re: First Time HO tax credit.Creative Legal… - Posted by Jack-E

Posted by Jack-E on April 30, 2010 at 17:29:47:

this would not be a SALE between related parties. We would simply be provididing a loan whith which he could use to buy it. Is that legal?

Re: First Time HO tax credit.Creative Legal… - Posted by John W_TX

Posted by John W_TX on May 08, 2010 at 20:06:33:

Well, except we currently own the property and our son would be
purchasing it from us, so technecly we are conveying it to him AND
providing the financing. We thought about a land trust but he would
still need to provide the HUD in his name to get the credit.

Re: First Time HO tax credit.Creative Legal… - Posted by Edwin

Posted by Edwin on May 07, 2010 at 14:21:06:

Your post was NOT clear at all. You first said “We are planning a legitimate home sale to our son,” and later you say this is not a sale between related parties, but you are simply planning to give him a loan?

There is nothing illegal about you loaning him the money. Seriously, you need to break this down better in your head before you ask this question. 1. Your son wants to buy a home and get the federal tax credit. 2. You would like to loan him all or part of the money required. A loan is a loan, and makes no difference where the money comes from. Your attitude really should me, "My son wants to buy a home and it’s none of anybody’s business-particularly the government-where he gets the money to complete the purchase (assuming of course, he doesn’t steal the money or something of that sort). Banks sometimes frown on down payment money that is borrowed, but what you have described should in no way disqualify him from getting the tax credit.

Re: First Time HO tax credit.Creative Legal… - Posted by John WTX

Posted by John WTX on May 17, 2010 at 23:25:43:

Sorry to confuse you Edwin, but I think you mis took a response to
my post, by JACK E. Where he thought that it would not be a sale.
I thought I have been very clear about the fact that it IS a sale
between two related parties i.e seller = me (Father) and Buyer= My
son. (actual fruit from my loins). I have never confused this for a
finance issue, I just know that both seller and buyer will have to be
listed on the HUD1 that is required to secure the tax credit. As far
as I know, there is an exclusion that requires that In a sale between
two related parties, the buyer cannot qualify for the stimulous tax
credit. Maybe it would have been clearer if I had used the word
exclusion instead if exemption, in my original post. Thanks for your
response, however it does not really apply, as the buyer is the one
recieving the benefit from Uncle Sam so the WOULD actually have
to know to whom the sale was made.