Tax News

CCH (cch.taxgroup.com) reports:

  The IRS has provided guidance with regard to allocating the new first-time homebuyer credit between unmarried co-purchasers of a principal residence pursuant to Code Sec. 36(b)(1)C). This new credit, added by the Housing and Economic Recovery Act (P.L. 110-289), allows a taxpayer to claim a credit that is equal to 10 percent of the purchase price of a residence purchased after April 8, 2008, and before July 1, 2009. The maximum amount of the credit is $7,500 ($3,750 for a married taxpayer filing a separate return). The total credit allocated between unmarried taxpayers cannot exceed $7,500.

  According to the guidance, if two or more taxpayers who are not married purchase a principal residence and otherwise satisfy the requirements of Code Sec. 36, the homebuyer credit may be allocated between the taxpayers using any reasonable method. A reasonable method includes allocating the credit between taxpayers who are eligible to claim the credit based on: (1) the taxpayers' contributions toward the purchase price of the residence as tenants in common or joint tenants, or (2) the taxpayers' ownership interests in the residence as tenants in common.

  Todd Solomon, partner, McDermott, Will and Emery, LLP, Chicago, told CCH, "By offering a valuable tax credit to taxpayers who are not married, Notice 2009-12 provides an important federal tax benefit for unmarried domestic partners. As domestic partnerships are not recognized under federal law, a benefit of this sort is rare."

  The IRS provides several examples illustrating how the credit may be allocated when unmarried taxpayers purchase a principal residence as tenants in common and apply in a similar manner to taxpayers who purchase a residence as joint tenants. In one of the examples, one of the unmarried co-owners contributed $45,000 and the other contributed $15,000 toward the $60,000 purchase price of a residence and each co-owner owns a one-half interest in the residence. In this case, the co-owners may allocate the allowable $6,000 credit: (1) three-fourths to the $45,000 contributor and one-fourth to the $15,000 contributor based on their contributions; (2) one-half to each based on their ownership interests in the residence; or (3) using any other reasonable method.

Notice 2009-12, 2009FED ¶46,247

Other References:

 
Code Sec. 36

  CCH Reference - 2009FED ¶4190.03

  Tax Research Consultant

  CCH Reference - TRC INDIV: 57,950