It gives me a headache to just hear of a buyer filing bankruptcy on a seller carry-back note! Unfortunately I’ve had this happen on notes we own and yes, the headaches, costs, and time delays can add up. We’ve had buyers that worked out a repayment plan and stuck to it, eventually getting current and even paying off the loan. We’ve also seen buyers use bankruptcy filing solely as a delay tactic to foreclosure.

I’m always a proponent for an easier way to work things out with the buyer, including buy-backs, deed in lieu of foreclosure, or realistic repayment plans. Just be careful to follow the rules and laws, especially when a buyer has already filed or is planning to file for bankruptcy. There is quite a bit of red tape that a qualified attorney can help you with.

Please feel free to email me through the website or call the office if you would like to discuss further.

All the best,

Tracy Z. Rewey

To my knowledge, the home buyer tax credits are not transferable. The credit relies heavily on the individual qualifications of the buyer. Of course qualifying buyers could always claim the credit, collect the cash, and then transfer the cash however they want!

All the best,

Tracy Z

Here is an excerpt from the IRS website for the documentation needed to claim the First Time Home Buyer Credit using Form 5405:

Q. What do I have to attach to my 2009 or 2010 return to prove that I bought a new home in order to claim the credit?

A. If you claim the credit on a 2009 (or later) return, you must attach a copy of your settlement statement. For most homebuyers, this will be a properly executed Form HUD-1, Settlement Statement (U.S. Department of Housing and Urban Development) that includes:

* Names and signatures (if available) of all parties involved,
* Property address,
* Purchase price, and
* Date of purchase.

If you purchased a mobile home and do not have a settlement statement, you should attach a copy of your executed retail sales contract showing all parties’ names and signatures, the property address, the purchase price and the date of purchase.

If you are claiming the credit for a newly constructed home and you do not have an executed settlement statement, you should attach a copy of your certificate of occupancy showing the name of the taxpayer, the property address, and the date of the certificate.

Source: IRS Website at: http://www.irs.gov/newsroom/article/0,,id=218698,00.html

Thanks for your comments and questions.

Tracy Z

It seems answers are seldom straight forward when it comes to taxes. Since I’m not a tax accountant I’m going to defer to the IRS . Here is an excerpt from the the IRS Instructions for Form 5405 First Time Home Buyer Credit:

“The purchase price is the adjusted basis of your home on the date you purchased it. This includes certain settlement or closing costs (such as legal fees and recording fees) and your down payment and debt to purchase the home (such as a first or second mortgage or notes you gave the seller in payment for the home). If you build, or contract to build, a new home, your purchase price includes costs of construction. For more information about adjusted basis, see Pub. 551, Basis of Assets.”

For more information please feel free to read the Publications at http://www.irs.gov or contact a qualified tax professional.

Congratulations on purchasing a home for cash and taking advantage of the Home Buyer Tax Credit!