taxes

First-time homebuyer denied tax credit

George SaenzQuestionDear Tax Talk,
I recently purchased a manufactured home on land that was given to me by my mother. I've used this address to file my taxes every year. I applied for the first-time homebuyer tax credit and was denied because I've used this address before. This is the first time I've owned a home, so it's a new home on the same land. Why was I denied and what can I do?
-- Sherry

AnswerDear Sherry,
The first-time homebuyer tax credit started out as a loan of $7,500, and then it became a housewarming present of $8,000 from the government.

Whether a loan or a gift, it became a feeding frenzy for the unscrupulous. One home was claimed by 67 taxpayers; 1,295 prisoners received $9 million, and 53 IRS employees embarrassed their employer. In the 2008 tax filing season, the IRS had no effective controls to determine if a home was purchased, if it was a first home or if it was purchased in the correct time frame. For 2009, IRS tightened the noose and required homebuyers to file paper tax returns with proof.

As proof, the IRS wanted a copy of the HUD-1 settlement statement if you purchased your home. In your case, no HUD-1 was prepared; the IRS wanted a copy of your retail sales contract for the purchase of the trailer. Assuming you attached this, the IRS is probably curious why the address hasn't changed. The IRS offers limited guidance on manufactured home purchases.

If you've used the address for years, I assume the land wasn't vacant when your mother gave it to you. If she gave you the land with a prefab that was never put in your name, then I would say that the replacement with a new home in your name should qualify for the credit. If this is the case, then I suggest you write IRS with your claim for the credit detailing the reason your address hasn't changed. Alternatively, maybe you can qualify for the replacement home credit of up to $6,500.

Check out IRS viral videos for homebuyers on YouTube.com. Next, the IRS will be tweeting.

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To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. federal tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein. Taxpayers should seek professional advice based on their particular circumstances.

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