Discussion:Owner Occupied vs. Primary Residence
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Discussion Forum Index --> Tax Questions --> Owner Occupied vs. Primary Residence
| February 8, 2010 | |
| For various complex and confusing reasons client wants to purchase a single family residence (sfr) from his father and sell it pretty quickly. The lender quoted a rate on a mortgage but required the sfr be "owner occupied". Meanwhile, client is claiming the First Time Homebuyer Credit on the condo he bought in mid-2009. He will have to repay the credit if the condo ceases to be his principal residence within 36 months of purchase.
If the family member's home must be owner-occupied, does that mean the condo can no longer be his principal residence? Or can the condo remain his principal residence, with the sfr being his "second home". It seems to me that the "owner-occupied" constraint means the sfr cannot be used as an investment or a rental property. Thanks, The New Tax Guy | |
| 8 February 2010 | |
| This doesn't sound like a tax question, but rather, more like a question about qualifying for a loan.
From a tax standpoint, a taxpayer can have more than one "owner-occupied" home and have only one that constitutes his or her principal residence. Take for example the numerous individuals who live in the Northeast or Midwest U.S. states who are referred to as "snowbirds" because they spend a large portion of the winter in warmer locations such as Florida. Their principal residence is in the northern state and they have a second residence in the southern state. | |
| February 8, 2010 | |
| Dave, thanks for your response. I think it IS a tax question. The tax question is: will my client have to repay the first time homebuyer credit if he purchases a second home that is not for investment or rental purposes? | |
| 8 February 2010 | |
| I think you answered this question in your original post:
"He will have to repay the credit if the condo ceases to be his principal residence within 36 months of purchase." | |
| 8 February 2010 | |
| Only if it is his 'principal residence'. And if he signs a statement to the mortgage company stating that it is (and it really isn't), he needs to beware of mortgage fraud. | |
| 8 February 2010 | |
| I don't see a contradiction between giving the mortgage company a signed statement that the new single-family residence will be "owner-occupied" and that the existing condo continues to be the taxpayer's principal residence.
There would, of course, be a problem if the taxpayer gave the mortgage company a statement that the new single-family residence will be his principal residence when, in fact, it won't. | |
| 9 February 2010 | |
| If his intent is to make a quick turn around sale does he intend to live in the residence until he sells it. And, if that is the case wouldn't he have to repay the credit on the other residence. I think the bank is saying if it isn't owner occupied he has to pay an "investment" interest amount rather than an "owner occupied" amount.
My question would be: does he want to risk the possible payback of the credit in order to save interest costs on the condo? | |
