Would the 2008 First Time Homebuyers credit recapture be 0 if client sold home in 2011 and has a loss? I was filling out Form 5405 and it came out as 0, but in reading the tax guide & instructions it sounded like they should repay all of the credit for 2008 since it was a loan.
Did you reduce the original basis in the home by the amount of credit received, then increase it by the amount of credit repaid? If you still have a loss then no need to repay Uncle Sam. If reducing the basis flips you to a gain you repay the amount of the gain.
Thanks, Rick!! No, I didn't reduce basis, but would still be a loss. I appreciate the fast response here and helping my brain freeze!! :-)
Happy to help. It was more like a loan with loss insurance bundled in. :)
Based on absolutely no authority, I would expect the IRS to closely scrutinize these transactions (although I expect it will take them 2 1/2 years to do so.) Make sure you document basis, selling expenses, etc. now while the data is readily available.
If somebody tried to stiff me for $7K I'd want to see some documentation. Again, just my gut feel based on past FTHB credit abuse.
That's why I found it odd the sales price & basis info didn't fill in on the Form 5405. All that prints on the form is that there was a loss and no recapture is required. I'll be sure to keep all the info in my files though. A couple of the numbers I got verbally, but will request documentation since you brought up valid points about IRS! Thanks again!
