Self built long term resident new home credit

[henryclay]

The taxpayer owns several, (not many, but some), rural acres. Has lived on it in a mobile home for "many" years. Has been doing his own hammering and nailing and building his permanent home on the property "over the past 5 or 6 years" and he, (they), moved into it in May, 2010 even though it is not completely finished and won't be for another "couple of years".

There are no contracts, no inspections, and no mortgage. He has "most of his receipts for building materials" which total ~~ $50,000 ~~ and has "only recently" heard of a "first time home buyer credit". . . . along with all the advice his Friends can give him on how to get it on a tax return. . . .

My question is simple: How to demonstrate to the Service that he has a self constructed home that he moved into during the qualifying period and, except for the bureaucracy, should then qualify for the credit?

Any and all suggestions would be appreciated.

[mwcpa]

i do not think this will qualify.... the mobile home is a home and therefore he was already an existing home owner and cannot be considered a first time homeowner...sorry...(and IRS "audits" all 5405 as a result of the few frauds that caught the eye of the entertainment, I mean news, media and made its way to Congress who yelled at the IRS for the poor policing of the initially poorly written law by Congress that had more holes than swiss cheese)

From IRS.gov

"Taxpayers who have not owned another principal residence at any time during the three years prior to the date of purchase are considered first-time home-buyers. For example, if you bought a home on July 1, 2008, you cannot take the credit for that home if you owned, or had an ownership interest in, another principal residence at any time from July 2, 2005, through July 1, 2008."

and

"Q. If a taxpayer purchases a mobile home (manufactured home) with land and qualifies for the credit, is the amount of the credit based on the combined cost of the home and land?

A. Yes. The first-time home-buyer credit is ten percent of the purchase price of a principal residence. The total purchase price (mobile home and land) is used to determine the amount of the first-time home-buyer credit.

Q. Is a taxpayer who purchases a mobile home and places the home on leased land eligible for the first-time home-buyer credit?

A. Yes. A mobile home may qualify as a principal residence and it is not necessary that the taxpayer own the land to qualify for the first-time home-buyer credit.

Q. Can a taxpayer who purchases a travel trailer qualify for the credit?

A. A travel trailer that is affixed to land may qualify as a principal residence"



From IRS.gov related to self constructed or new construction..

Home Construction
Q. I plan to build a home and occupy it in 2009 or early 2010. Can I claim the first-time home-buyer credit now and use the funds toward the down payment or other ongoing construction costs?

A. No. To qualify for the first time home buyer credit, the residence must be purchased. By statute, a residence which is constructed by the taxpayer is treated as purchased on the date the taxpayer first occupies the residence. (05/06/09)


Q. I entered into a written home construction contract with a homebuilder before May 1, 2010, and the contract provides for completion of the home before July 1, 2010. Can I take the credit for the construction costs?

A. Your home construction contract qualifies as a binding contract, entered into on or before April 30, 2010, to close on the purchase of a principal residence on or before June 30, 2010. If you occupy the home on or before June 30, 2010, and meet the other requirements, you can take the credit. (12/17/09)

Q. I entered into a written home construction contract with a homebuilder before May 1, 2010, and the contract provides for completion of the home before September 1, 2010. Can I take the credit for the construction costs?

A. Your home construction contract does not qualify as a binding contract to close on the purchase of a principal residence on or before June 30, 2010. Therefore, you do not qualify for the two-month extension of the deadline for completing the purchase in the case of a binding contract. However, if you occupy the home on or before April 30, 2010, and meet the other requirements, you can take the credit. If you do not occupy the home on or before April 30, 2010, you cannot take the credit.
(12/17/09)

[henryclay]

Thanks, mwcpa, and except for the reduced credit for "long term residents" I would agree. Paraphased, the long term resident is defined as a qualifying individual as follows:

Long-Term Resident Homebuyers
People who already own a home can qualify for the tax credit if they buy another home. To qualify, individuals needs to have owned and lived in their residence for at least five consecutive years in the eight-year period that ends on the purchase date of the new property.

The credit is 10% of the cost of the new home with a $6,500 cap. As I understand it, all other qualification requirements remain the same.

This person was not building the home to get the credit, but it is available to him if he can satisfacorily demonstrate that it is his new permanent home. The problem seems to be in making that demonstration.

[commentator]

From the facts in the op it appears that no occupancy permit has been issued by the local government. Therefore, the structure is not eligible for any homebuyer or other residential related credit or deduction.

[henryclay]

Thank you, commentator. No occupancy permit has been required before, and the locals are just getting around to discussing an inspection and certification process. The word is that it will add about a thousand dollars to the construction costs, so there is resistance to it. This is rural, , , way out in the country , , , property.

I see in the 5405 instruction a possible route. Insurance and tax records.

I was hoping someone else had encountered a similar situation and would share their experience about how it was resolved.

[commentator]

I haven't had direct experience but other tax pros have told me their experience confirms the requirment of an occupancy permit being issued before the deadline expires as a condition of meeting such deadlines.

Pardon my cynicism but it's not just folks "way out in the country" who want the tax breaks and similar benefits without meeting the other rules of society.