Part III. Administrative, Procedural, and Miscellaneous

Allocation of Section 36 First-Time Homebuyer Credit Between Taxpayers Who Are Not Married

Notice 2009–12

PURPOSE

This notice provides guidance under § 36(b)(1)(C) of the Internal Revenue Code (Code) for allocating the first-time homebuyer credit between taxpayers who are not married.

LAW

Section 36 was added to the Code by section 3011 of the Housing and Economic Recovery Act of 2008, Pub. L. No. 110–289, 122 Stat. 2654, 2888 (2008). Section 36(a) provides that a taxpayer who

is a first-time homebuyer of a principal residence (as defined in § 121) may claim a credit on the taxpayer’s income tax return equal to 10 percent of the purchase price of the residence. Section 36(c)(1) defines “first-time homebuyer” as any individual (and if married, the individual’s spouse) who has not had an ownership interest in any principal residence during the three-year period ending on the date of the purchase of the principal residence. Section 36(c)(3) defines “purchase” as any acquisition, but only if (i) the taxpayer did not acquire the property from a related person, and (ii) the taxpayer’s basis in the property is not determined, in whole or in part, by reference to the adjusted basis of the property in the hands of the person from whom the taxpayer acquired the property, or determined under § 1014(a) (relating to property acquired from a decedent). For purposes of § 36(c)(3)(i),

§ 36(c)(5) provides that a person is treated as related to another person if the relationship would result in the disallowance of losses under § 267 or § 707, except that members of a family of an individual include only the individual’s spouse, ancestors, and lineal descendants.

Pursuant to § 36(h), the first-time homebuyer credit applies to a home purchased on or after April 9, 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), as provided in § 36(b)(1)(A) and (B). Under § 36(b)(2), the credit begins to phase out for a taxpayer whose modified adjusted gross income (MAGI ) is $75,000 ($150,000 for married taxpayers filing a joint return) (“MAGI threshold”). The allowable credit is reduced by an amount equal to:

Maximum Allowable x MAGI in excess of $75,000 ($150,000 for married filing jointly).

Credit $20,000

The credit is completely phased out for a taxpayer whose MAGI is $95,000 ($170,000 for married taxpayers filing a joint return) (“MAGI cap”).

illustrated in the examples also apply in a similar manner to taxpayers who purchase a principal residence as joint tenants. Unless otherwise indicated, assume that in each example A and B (i) purchase a principal residence on May 1, 2008, (ii) are not married to each other, (iii) do not have MAGI in excess of the MAGI threshold, and (iv) are first-time homebuyers who otherwise satisfy the requirements of § 36.

Example 1. A contributes $45,000 and B contributes $15,000 towards the $60,000 purchase price of a residence. Each owns a one-half interest in the residence as tenants in common. Under § 36(a), the allowable credit is limited to 10 percent of the purchase price, or $6,000. A and B may allocate the allowable $6,000 credit three-fourths to A and one-fourth to B based on their contributions toward the purchase price of the residence, one-half to each based on their ownership interests in the residence, or using any other reasonable method (for example, the entire credit to A or B because both A and B are eligible to claim the entire allowable credit).

Example 2. A contributes $10,000 for a down payment towards the $100,000 purchase price of a residence, and A and B obtain and are jointly liable for a $90,000 mortgage for the remainder of the purchase price.

Section 36(f) generally requires a taxpayer who claims the first-time homebuyer credit to repay the credit allowed in 15 equal annual installments beginning with the second taxable year after the taxable year in which the taxpayer claims the credit. This repayment obligation may be accelerated or forgiven under certain exceptions as provided in § 36(f).

For eligible purchases in 2008, a taxpayer claims the credit by attaching Form 5405, “First-Time Homebuyer Credit,” to the taxpayer’s 2008 tax return. For eligible purchases in 2009, a taxpayer may elect to claim the credit for 2008 or 2009 by attaching Form 5405 to the taxpayer’s original or amended 2008 tax return or 2009 tax return.

APPLICATION

Section 36(b)(1)(C) provides that the Secretary may prescribe the manner in which the first-time homebuyer credit is allocated between two or more taxpayers who are not married and who purchase a principal residence. The total credit allo

cated between the taxpayers cannot exceed $7,500. For purposes of § 36(b)(1)(C), if two or more taxpayers who are not married purchase (within the meaning of § 36(c)(3)) a principal residence and otherwise satisfy the requirements of § 36, the first-time homebuyer credit may be allocated between the taxpayers using any reasonable method. A reasonable method is any method that does not allocate any portion of the credit to a taxpayer not eligible to claim that portion. A reasonable method includes allocating the credit between taxpayers who are eligible to claim the credit based on (1) the taxpayers’ contributions towards the purchase price of a residence as tenants in common or joint tenants, or (2) the taxpayers’ ownership interests in a residence as tenants in common.

EXAMPLES

The examples illustrate how the firsttime homebuyer credit may be allocated when A and B purchase a principal residence as tenants in common. The rules

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Each owns a one-half interest in the residence as tenants in common. Under § 36(b)(1)(A), the allowable credit is not $10,000 (10 percent of the purchase price) but is limited to $7,500. A and B may allocate the allowable $7,500 credit 55 percent to A and 45 percent to B based on their contributions toward the purchase price, one-half to each based on their ownership interests in the residence, or using any other reasonable method (for example, the entire credit to A or B because both A and B are eligible to claim the entire allowable credit).

Example 3. On April 15, 2008, A pays the entire $100,000 purchase price of a residence and is the sole owner. Under § 36(b)(1)(A), the allowable credit is not $10,000 (10 percent of the purchase price) but is limited to $7,500. On May 12, 2008, A transfers a one-half interest in the residence to B as a tenant in common for $10,000. A may claim the entire allowable $7,500 credit. Because B acquired B ’s interest in the residence from A in part by gift, B ’s basis in the residence is determined under § 1015 by reference to A ’s basis in the residence. Therefore, B did not purchase an interest in the residence within the meaning of § 36(c)(3), and no portion of the credit may be allocated to B because B is not eligible to claim any portion of the credit.

Example 4. A and B each contributes $50,000 towards the $100,000 purchase price of a residence and owns a one-half interest in the residence as tenants in common. Under § 36(b)(1)(A), the allowable credit is not $10,000 (10 percent of the purchase price) but is limited to $7,500. However, B is not a first-time homebuyer within the meaning of § 36(c)(1). Therefore, no portion of the credit may be allocated to B because B is not eligible to claim any portion of the credit. A may claim the entire allowable $7,500 credit.

Example 5. A contributes $75,000 and B contributes $25,000 towards the $100,000 purchase price of a residence, and each owns a one-half interest in the residence as tenants in common. Under § 36(b)(1)(A), the allowable credit is not $10,000 (10 percent of the purchase price) but is limited to $7,500. A ’s MAGI is $100,000 and B ’s MAGI is $60,000. Because A ’s MAGI exceeds the $95,000 MAGI cap, any portion of the credit allocated to A would be reduced to $0. A and B may allocate the entire allowable $7,500 credit to B because B ’s MAGI is less than the $75,000 MAGI threshold and, therefore, B is eligible to claim the entire allowable credit.

Example 6 . A and B each contributes $50,000 towards the $100,000 purchase price of a residence and owns a one-half interest in the residence as tenants in common. Under § 36(b)(1)(A), the allowable credit is not $10,000 (10 percent of the purchase price) but is limited to $7,500. A ’s MAGI is $80,000 and B ’s MAGI is $60,000. Because A ’s MAGI exceeds the $75,000 MAGI threshold by $5,000, any portion of the allowable credit allocated to A will be reduced by one-quarter, $5,000 (MAGI in excess of $75,000) / $20,000. A and B may allocate the allowable $7,500 credit one-half to A and one-half to B ($3,750 each) based on their contributions toward the purchase price of the residence or their ownership interests in the residence. However, A ’s $3,750 portion of the credit is limited by § 36(b)(2) and is reduced by one-quar

ter ($3,750 x .25 = $937.50) to $2,812.50 ($3,750

• 937.50). Alternatively, A and B may allocate the allowable $7,500 credit using any other reasonable method (for example, the entire credit to B because B ’s MAGI is less than the $75,000 MAGI threshold and, therefore, B is eligible to claim the entire allowable credit).

Example 7 . A and B, who are sisters, each contributes $50,000 towards the $100,000 purchase price of a residence and each owns a one-half interest as tenants in common. Under § 36(b)(1)(A), the allowable credit is not $10,000 (10 percent of the purchase price) but is limited to $7,500. A and B purchase the residence from their cousin, C . A, B, and C are not related persons within the meaning of § 36(c)(5). Therefore, A and B may allocate the allowable $7,500 credit one-half to A and one-half to B based on their contributions toward the purchase price of the residence or their ownership interests in the residence. Alternatively, A and B may allocate the allowable $7,500 credit using any other reasonable method (for example, the entire credit to A or B because both A and B are eligible to claim the entire allowable credit).

DRAFTING INFORMATION

The principal author of this notice is Christina M. Glendening of the Office of Associate Chief Counsel (Income Tax & Accounting). For further information regarding this notice, contact Ms. Glendening at (202) 622–4920 (not a toll-free call).

Disclosure of Statistical Compilations of Anonymous Tax Return Information Under Section 7216

Notice 2009–13

PURPOSE

This notice provides interim guidance relating to the ability of a tax return preparer to disclose and use statistical compilations of anonymous tax return information ( i.e., information in a form that cannot be associated with, or otherwise identify, directly or indirectly, a particular taxpayer) described in § 301.7216–1(b)(3)(i)(B) in support of a tax return preparer’s tax return preparation business. This notice provides guidance on the tax return information a tax return preparer may use to compile anonymous statistical information that the tax return preparer may disclose without taxpayer consent. The ability of a tax return preparer to disclose and use statistical compilations of tax return information that

contain any taxpayer identifying information is not addressed in this notice and continues to be governed by § 301.7216–2(o).

BACKGROUND

On January 3, 2008, the Treasury Department and IRS issued final regulations under section 7216 (T.D. 9375, 2008–5 I.R.B. 344) applicable to disclosures or uses of tax return information occurring on or after January 1, 2009. The final regulations replaced previously issued final regulations that remained applicable to disclosures or uses of tax return information occurring prior to January 1, 2009. The final regulations included § 301.7216–1(b)(3)(i)(B) which, for disclosures and uses of tax return information occurring on or after January 1, 2009, provides that tax return information includes statistical compilations of tax return information, including information in a form that cannot be associated with, or otherwise identify, directly or indirectly, a particular taxpayer. The final regulations also included the addition of § 301.7216–2(o), which provides limited purposes for when a tax return preparer may use tax return information to produce statistical compilations and for when it may use or disclose the produced statistical compilation. Section 301.7216–2(o) currently allows a tax return preparer to use statistical compilations if such use directly supports the tax return preparer’s tax return preparation business. However, § 301.7216–2(o) also currently prohibits the disclosure of all statistical compilations, both taxpayer-identifying and anonymous, unless the disclosure is made in order to comply with financial accounting or regulatory reporting requirements or occurs in conjunction with the sale or other disposition of the compiler’s tax return preparation business. This notice provides interim guidance with respect to the ability of a tax return preparer to disclose and use statistical compilations of anonymous tax return information data in support of its tax return preparation business.

The Treasury Department and IRS have become aware that, under current § 301.7216–2(o), tax return preparers may not disclose anonymous statistical compilations for other purposes that may provide benefits to taxpayers generally or to the public as a whole. Anonymous statistical

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taining or reflecting average amounts of refund, credit, or rebate, which use and disclosure will continue to be governed by the provisions of § 301.7216–2(o). Fundraising activities conducted by Volunteer Income Tax Assistance programs and other organizations described in section 501(c) of the Internal Revenue Code in direct support of their tax return preparation services are not marketing and advertising under this interim guidance. For purposes of this interim guidance, “tax return preparation business” includes bona fide research or public policy discussions concerning state or federal taxation or requiring data acquired during the tax return preparation process. Except as provided in this interim guidance, the provisions of § 301.7216–2(o) apply to the use and disclosure of statistical compilations of tax return information.

A tax return preparer may not sell or exchange for value a statistical compilation of data described in § 301.7216–1(b)(3)(i)(B), in whole or in part, except in conjunction with the transfer of assets made pursuant to the sale or other disposition of the tax return preparer’s tax return preparation business.

EXAMPLES

The interim guidance described by this notice may be illustrated by the following examples.

Example 1 . Preparer A is a tax return preparer as defined by § 301.7216–1(b)(2)(i)(A). In 2008, A used tax return information to produce a statistical compilation of data for both internal management purposes and to support A’s tax return preparation business. The statistical compilation included a cell containing the information that A prepared thirty-two S corporation tax returns in 2008. In 2009, A decides to embark upon a new marketing campaign emphasizing its experience preparing small business tax returns. In the campaign, A discloses the cell containing the number of S corporation tax returns prepared in 2008. A’s disclosure does not include any information that can be associated with or that can identify any specific taxpayers. A may disclose the anonymous statistical compilation without taxpayer consent because it complies with the interim guidance described in this notice.

Example 2 . Preparer B is a tax return preparer as defined by § 301.7216–1(b)(2)(i)(A). In 2009, in support of B’s tax preparation business, B advertises that the average tax refund obtained for its clients in 2008 was $2,800. B may not disclose this information because it contains a statistical compilation reflecting average refund amounts.

Example 3 . Preparer C is a tax return preparer as defined by § 301.7216–1(b)(2)(i)(A) and is a Volunteer Income Tax Assistance program. In 2009, in

data disclosed within the constraints provided by the interim guidance described in this notice may be used by tax return preparers to assist taxpayers in making informed choices about filing options and tax return preparers. The availability of anonymous statistical data can be useful from a public policy perspective, as the availability of such data can assist lawmakers, academics, non-profits and other agencies in the facilitation of sound tax policy analysis and decisions. In addition, volunteer tax return preparers that provide free tax return preparation services to low- and moderate-income taxpayers and families would be able to demonstrate the impact of their efforts in order to obtain and administer funding necessary for their continued operation.

The interim guidance provides that tax return preparers may use and disclose, without taxpayer consent, statistical compilations of tax return information to support the tax return preparer’s tax return preparation business, but any disclosure of a statistical compilation must be in a form which cannot be associated with, or otherwise identify, directly or indirectly, a particular taxpayer. To further ensure anonymity, this interim guidance prohibits the disclosure of statistical compilations with cells containing data from fewer than twenty-five tax returns. Finally, the sale or exchange for value of all or any part of an anonymous statistical compilation is prohibited except if the sale occurs in conjunction with the transfer of assets made pursuant to the sale or other disposition of the tax return preparer’s tax return preparation business.

This interim guidance continues to prohibit disclosure of anonymous statistical compilations of average refund, credit, or rebate amounts, or a part thereof, for purposes of advertising or marketing. The Treasury Department and IRS are concerned that advertising and marketing that discloses average refund, credit, or rebate amounts could create inaccurate expectations on the part of taxpayers and improper incentives on the part of tax return preparers to meet those expectations at the expense of tax return accuracy. Accordingly, in the case of the use or disclosure in advertising and marketing of statistical compilations of average refund, credit, or rebate amounts, this interim guidance retains the existing rules gov

erning the use and disclosure of statistical compilations found in § 301.7216–2(o). In addition, the IRS will continue to rely on all existing enforcement powers to address concerns regarding advertising and marketing claims by tax return preparers.

The Treasury Department and the IRS believe that this interim guidance appropriately balances concerns regarding safeguarding the confidentiality of tax return information against the tax industry’s (public, private, and governmental) need to evaluate and use anonymous tax return information. The Treasury Department and the IRS will apply the rules set forth in this notice during 2009 while devoting further consideration, including the consideration of any public comments in response to this notice, to whether this interim guidance should be adopted by regulations or further modified.

INTERIM GUIDANCE UNDER SECTION 7216

A tax return preparer may use tax return information to produce a statistical compilation of data described in § 301.7216–1(b)(3)(i)(B). The purpose and use of the statistical compilation must relate directly to the internal management or support of the tax return preparer’s tax return preparation business. A tax return preparer who produces a statistical compilation of data described in § 301.7216–1(b)(3)(i)(B) may not disclose the compilation, or any part thereof, to any other person unless disclosure of the statistical compilation is anonymous as to taxpayer identity, does not disclose cells containing data from fewer than twenty-five tax returns, and is in direct support of the tax return preparer’s tax return preparation business. A statistical compilation is anonymous as to taxpayer identity for purposes of this interim guidance if it is in a form which cannot be associated with, or otherwise identify, directly or indirectly, a particular taxpayer. For purposes of this interim guidance, marketing and advertising is in direct support of the tax return preparer’s tax return preparation business as long as the marketing and advertising is not false, misleading, or unduly influential. However, this interim guidance does not apply to the use or disclosure in marketing or advertising of statistical compilations con

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