Form 5405 states that you can not claim the first time homebuyer tax credit if you purchase the home from a relative. However, 8a states that a related person includes your spouse, ancestors, (parents, grandparents, etc) or lineal descendents.

I intend to purchase a home from my brother. Based on the definition of "relative" in 8a, I think I would still qualify for the $8000 tax credit. It seems as though the clause is meant to prohibit essentially gifting the home as inheritance and getting $8000 from the government too.

I am uncertain though because form 5405 also says, "For more information about related persons, see Nondeductible Loss in Chapter 2 of Pub. 544, Sales and Other Dispositions of Assets. When determining whether you acquired your main home from a related person,
family members in that discussion (except item 7) include only the people mentioned in 8a above."

Chapter 2 of Pub. 544 includes siblings as relatives, but siblings are not included in 8a of form 5405. Chapter 2 of Pub. 544 actually names "only siblings," and I am not my brother's only sibling....don't know if that makes a difference.

Can someone please advise? Also, can the government change the rule after I've already made the purchase?

AtlantaTaxExpert

At face value, it would seem that you could buy from your brother and still qualify for the Credit.

However, to be sure, I would formally query the IRS. You can call at 1-800-829-1040.

MukatA

Yes, it appears that for the purpose of home buyer credit, a relative is spouse, parents, grandparents, and linear descendants (children, grandchildren, etc.).
Brother is not a relative for this credit purspose.
Your U.S. Tax Return: First-Time Homebuyer Credit

sleuth1957

NO! You canot get the credit from buying the house form a full or half, brother or sister. They are DIRECT LINEAL DECEDENTS to you.Siblings, aunts and uncles aren’t mentioned on some of the forms but buyers are referred to IRS Publication 544 for more details. In that publication, close relative is further defined as members of a family, including only brothers, sisters, half-brothers, half-sisters, spouse, ancestors (parents, grandparents, etc.), and lineal descendants (children, grandchildren, etc.).
However, it appears that you can buy a home from an aunt, uncle, niece or nephew and may still qualify for the credit.

AtlantaTaxExpert

I disagree. In both links below, lineal and ancestral relations are specifically cited as being prohibited sellors of the home for the purposes of this credit.

First-Time Homebuyer Credit Questions and Answers: Basic Information

First-Time Homebuyer Credit Provides Tax Benefits to 1.4 Million Families to Date, More Claims Expected

A sibling is NOT a lineal or ancestral relation, and I do not believe that IRS Pub 544 applies in this case.

I plan to contact the IRS to get deinitive guidance on this issue.

sleuth1957

I called the IRS and after 2 phone trees and 25 minutes of waiting the answer is this:
You CAN take the credit if buying from an Aunt Uncle or Cousin. These people are NOT your direct lineal decedents. You CANNOT get the credit if buying a house from brothers or sisters, half brothers or sisters, parents, grandparents or grandchildren. These people ARE your direct lineal ancestors.