No Homebuyer Credit for Purchase from Parents

A taxpayer does not qualify for the first-time homebuyer credit of up to $8,000 if the home is purchased from an ancestor or other related party, including a parent. In one case, a taxpayer who bought his home from his parents claimed the credit because he did not know about this specific eligibility rule. In all other respects, he qualified; he was a first-time homebuyer with income below the credit threshold.

He argued that he was entitled to the credit because the IRS did not make this specific rule clear:

• Form 5405, First-Time Homebuyer Credit, did not include any explanation about this rule.
• IRS Publication 4819, Important Information about the First-Time Homebuyer Credit, also did not contain any explanation of the rule about purchases from ancestors.

The Tax Court rejected the taxpayer’s argument. The ban on purchases from related parties is a statutory rule that the Court cannot change or ignore. The fact that the taxpayer’s accountant failed to learn the details of the credit was unfortunate for the taxpayer. Neither the IRS’s omission of this information nor the accountant’s failure to learn it provides any legal basis for allowing the credit.

Source: Cary Allen Nievinski v. Commissioner; T.C. Summ. Op. 2011-10