IRS Provides General Explanation of Section 36 and the Homebuyer Tax Credit

"The Honorable Tom Latham

Member, U.S. House of Representatives

1421 South Bell Avenue, Suite 108A

Ames, Iowa 50010

Attention: * * *

Dear Congressman Latham:

This letter responds to your inquiry, dated January 27, 2010, on behalf of your constituent, * * *. She asked whether she and her husband could qualify for the first-time homebuyer credit on a jointly purchased house, if either she or her husband owned and resided in a mobile home during the three year period before the purchase of the house.

Generally, section 36 of the Internal Revenue Code (the Code) provides a refundable credit for a first-time homebuyer of a principal residence. A first-time homebuyer is defined as any individual who has not had an ownership interest in a principal residence at any time during the three-year period before the date of the purchase of another principal residence. If a married couple purchases a home, to obtain the credit both spouses must qualify as first-time homebuyers on the date of purchase (section 36(c)(1)). If either spouse had an ownership interest in a principal residence during the three year period before purchase, neither spouse may claim the first-time homebuyer credit for the purchase of the subsequent residence.

For purposes of the first-time homebuyer tax credit, the term "principal residence" has the same meaning as in section 121 of the Code (section 36(c)(2)). A principal residence may be a house, a houseboat, a house trailer, a mobile home, a cooperative apartment, or a condominium. See section 1.121-1(b)(1) of the Income Tax Regulations; page 3 of Publication 523, Selling Your Home (enclosed).

* * * indicated that the IRS is reviewing her and her husband's pending claim for a first-time homebuyer credit. Please note that we are not addressing that administrative action in this letter. This letter provides only a general explanation of the requirements of section 36.

I hope this information is helpful. If you have any further questions, please contact * * * or * * * at * * *.

         Sincerely,

         George J. Blaine

         Associate Chief Counsel

         (Income Tax & Accounting)

Enclosure"