Land Contracts and First Time Home Buyers.

Land Contracts and First Time Home Buyers.

 

As you know, First-time home buyers purchasing a home are eligible for a tax credit. To qualify for the (up to) $8000.00 tax credit, a home must be purchased on or after January 1, 2009, have a binding contract on or before April 30, 2010 and close on or before July 1, 2010. For the purposes of the tax credit, the purchase date is the date when closing occurs and the title to the property transfers to the home owner. But does a purchase with the seller retaining legal title and the buyer obtaining an equitable/vendee interest qualify for the tax credit? A limited exception exists for certain installment sale purchases.

On July 2, 2009, the IRS addressed the seller financing acquisition issue and stated that if the taxpayer obtains the "benefits and burdens" of ownership of a residence in a seller financing arrangement, then the taxpayer can claim the credit even though the seller retains legal title. Factors that indicate that a taxpayer has the benefits and burdens of ownership include: 1. the right of possession, 2. the right to obtain legal title upon full payment of the purchase price, 3. the right to construct improvements, 4. the obligation to pay property taxes, 5. the risk of loss, 6. the responsibility to insure the property and 7. the duty to maintain the property.

 

For more information, please visit the IRS website at www.irs.gov or contact your CPA or tax attorney.

Debra Lynn Schirmer

Debra Lynn Schirmer

Associate Broker
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