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Lev
Lev, Tax Advisor
Category: Tax
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Experience:  Taxes, Immigration, Labor Relations
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My mother (deceased 1 1/2 yrs.) left her house to us (children)

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My mother (deceased 1 1/2 yrs.) left her house to us (children) in the form of a trust. We all are named as trustees. My brother wants to buy the house. Should the deed be transferred out of the trust into our names before he buys it? Also, a lender told him that he would not qualify for the $8000 first-time buyer credit because he already is part owner. This doesn't seem right to us; he has never purchased a home before, and inherited 1/4 of this home. What can you tell me about this, and can you point me in the right direction? We are not going through a real estate agent; owner selling only. Thanks for your input.
Marie Wiley
Submitted: 8 years ago.
Category: Tax
Expert:  Lev replied 8 years ago.

Unfortunately - the lender is correct...

Please see instructions for the form 5405 - http://www.irs.gov/pub/irs-pdf/f5405.pdf

 

To be considered a first-time homebuyer - your brother should:

-- not own any other main home during the 3-year period ending on the date of purchase - because he inherited 1/4 of this home - that requirement would not met.

 

See also...

You cannot claim the credit if any of the following apply.

7. You acquired your home by gift or inheritance.

8. You acquired your home from a related person.

 

To be eligible for the credit - your brother should completely disclaim an inheritance and purchase the home for the true fair market price from other siblings.

 

Please be aware that for the purpose of this credit - a related person includes:

-- Your spouse, ancestors (parents, grandparents, etc.), or lineal descendants (children, grandchildren, etc.) - so the purchase from siblings seems OK for the credit.

Please provide the information above to your tax preparer for considerations.

Let me know if you need any help.

Customer: replied 8 years ago.
Didn't aswer my question about transferring deed into siblings names. Guess we should, and leave my brother's name out so he can claim credit?
Expert:  Lev replied 8 years ago.

You are correct - but please re-read the answer above.

 

To be eligible for the credit - your brother should completely disclaim an inheritance and purchase the home for the true fair market price from other siblings.

 

Because that is a complex issue and relatively large credit is in discussion - I strongly suggest to provide the information above to your tax preparer for considerations.

You may also confirm the answer by calling the IRS 1-800-829-1040.

 

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