Discussion:Resident Alien & First Time Homebuyer
From TaxAlmanac
Discussion Forum Index --> Advanced Tax Questions --> Resident Alien & First Time Homebuyer
Discussion Forum Index --> Tax Questions --> Resident Alien & First Time Homebuyer
| 28 January 2010 | |
| Husband is a resident alien (NRA) who has always rented in the past. Wife is a nonresident alien living in Canada. In the past he has filed in US as HOH with his resident alien son. Husband and wife jointly purchase a home in US on October 30, 2009 and both names are on HUD-1. Wife is still living in Canada and will continue to live there. I am thinking he is entitled to the full $8000 credit. Agree/disagree or otherwise? | |
| 29 January 2010 | |
| Disagree. The problem is that the wife, who is a nonresident alien, is shown on the HUD-1, so the question is, "Who purchased the residence?" The credit is specifically not allowed for the purchase of a residence by a nonresident alien.
See Discussion: First time home buyer credit for a non-resident | |
| 29 January 2010 | |
| I read the discussion you referred to before I posted and I couldn't find where the law prohibits the credit for a resident alien when the property is jointly purchased with a nonresident alien. I would argue that the husband is the equitable owner of the property. Again, I couldn't find any research on this situation. | |
| 30 January 2010 | |
| Will the resident alien husband and the nonresident alien wife be filing a joint return and making the election under IRC ยง6013(g)? Under this section, a U.S. citizen or resident alien may make an election to file a joint return with a nonresident alien spouse. If the election is made, then the nonresident alien spouse is treated as a resident alien for the entire year "for purposes of chapter 1" which includes the first-time homebuyer credit. And when both spouses are treated as resident aliens, and if they purchased their first-owned residence in Oct. 2009, then they are entitled to the $8,000 credit on the joint return. | |
| 30 January 2010 | |
| I was trying to keep it simple and not apply for an ITIN for the wife and not pull her Canadian income into the US tax return although I believe she would qualify for the foreign earned income exclusion if she makes the election to be treated as a resident alien. Dave, am I correct on this statement? I know there is a split allowed with this credit and given the situation would an equitable split be allowed for married couples? Anyone else have any suggestions? Again, Dave I am not arguing, just looking for alternatives. | |
Tax Writer (talk|edits) said: | 30 January 2010 |
| I think the husband would qualify for the credit. There is an example in the pubs of a father who co-signs for a duaghter, and is basically just a guarantee on the loan. The daughter is then eligible for the full credit and the father is not, as a co-signer. The situation above is similar:
The wife isn't living in the home She doesn't live with the husband She is basically just an additional guarantee on the loan That's how I would approach it. Tax Writer | |
| 31 January 2010 | |
| I've looked at the rules some more, and now believe that a joint return is a bad idea.
By filing a separate return, the husband's maximum credit would be $4,000. See Sec. 36(b)(1)(B). If the husband files a separate return, he would still be stuck with the problem that the wife's name is on the HUD-1 statement, and as I indicated above, the question, "Who purchased the residence?" comes up because the credit is specifically not allowed for the purchase of a residence by a nonresident alien. If the spouses elect to file a joint return under Sec. 6013(g) and treat the nonresident alien wife as a resident alien, then they could claim the full $8,000 credit. If the wife satisfies the "physical presence" test of Sec. 911(d)(1)(B), then she would be able to claim the foreign earned income exclusion. A foreign tax credit would be available if she paid Canadian income taxes to the extent that there is taxable foreign income remaining on the joint return. But another problem arises. Sec. 36(f)(2) accelerates recapture of the credit if the residence ceases to be the principal residence of either the husband or wife. With the wife living in Canada, this provision would be triggered. Maybe someone else has an idea. | |
| 1 February 2010 | |
| First of all, Thanks to both of you for the additional insight you have given me. Dave, I hadn't even thought about the recapture as the wife will not qualify the home as a personal residence. I think I will follow Tax Writer's approach and make the arguement if/when the time comes. | |
