The sale of personal residence has hit a solid wall! Stories
abound of home sellers reducing substantially the asking prices for
their homes which still languish unsold for well over a year and,
in some cases, two or more. It's so serious that Congress
sought fit to respond by way of enacting the Housing Assistance
Tax Act of 2008, granting to qualified first-time home buyers
up to $7,500 of tax credit, utilizable against future income. The
Act is very complicated and the IRS recently released a bulletin
(2008-106) which goes into substantial detail respecting
application of the Act and its numerous conditions and
limitations. Among the notable limitations is that the credits begin to phase
out at $75,000 for a single taxpayer and $150,000 for a married
couple filing jointly. Additionally, sales between family members
and close family members are disqualified for the credit. While called a "credit," what we really have here is
an interest-free loan which is to be repaid ratably over 15 years.
Thus, one who obtains the full credit of $7,500 must add $500 in
additional taxes for each tax year for 15 years, with no seeming
ability to accelerate and payoff at an earlier or faster timeframe.
Fortunately, any unpaid portion of the "loan" is forgiven
upon death of the individual who procured the loan. The balance of
the loan also becomes due upon sale of the home or cessation of its
use as a principal residence. If a transfer is made to a spouse in
the context of divorce, the transferee is responsible for making
all subsequent installment payments. No brief treatment of this subject matter is truly possible and
one should read the revenue ruling and/or seek a tax
practitioner's advice when contemplating utilization of this
new tax benefit. 1. Joseph N. DuCanto, 2009.© Joseph N. DuCanto is a
graduate of the Law School of the University of Chicago, and is an
attorney and partner in the Chicago, Illinois law firm of Schiller,
DuCanto and Fleck, a firm which limits its practice to Family Law.
Mr. DuCanto, after over 50 years as a member of the Bar, is a
nationally recognized expert in the area of Tax, Financial and
Estate Planning in Family Law matters, is a frequent lecturer to
Bar groups and a guest lecturer at numerous law schools throughout
the nation. In 2003 Mr. DuCanto was named a "Laureate of the
Illinois State Bar Association in recognition of his significant
contribution to the legal profession as well as to the public good.
He founded Securatex, Ltd. in 1982, a private security provider,
and currently serves as Chairman of the Board. He is a long-time
member of the American Society of Industrial Security (ASIS) and
has served as a training officer with respect to legal matters for
a number of Illinois police agencies. The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
Footnote