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QUESTION/HELP: Tax Credit Max $800,000? How to calculate that #

By
Real Estate Broker/Owner with Northern Virginia Homes - FRANKLY REAL ESTATE Inc

 

Ok, I got a tricky question about the new home buyer tax credit.

I was always told the tax credit was based on a contract price of $800,000. However some accountant seems to think the $800,000 has to be AFTER all costs. How can that be? Even including taxes? That means a home has to sell for under $765,000. How can that be right?

 

Where can I get clarification and proof?

Frank

 

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Anonymous
Marcia

Frank, according to the instructions for form 5405, the IRS says that the "purchase price" (limited to $800K) is the adjusted basis in the new property. "This includes certain settlement or closing costs (such as legal fees and recording fees) and your down payment and debt to purchase the home...)." The instructions refer the reader to Pub. 551, Basis of Assets.

Mar 10, 2010 12:44 PM
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