Hi all,

Michael, I had emailed you but if your mailbox is like mine, I thought I better post in the forum...

I have a question about the new $8,000 tax credit. Some associates are telling me that I can do a sandwich lease, and keep that tax credit money since the buyer can exercise their option to purchase...
I feel uneasy about that... am I being too skeptical?

Can we in fact, do a sandwich lease and utilize that tax credit for our benefit?

I will be looking forward to your response!

elisa kauffman-slack

Hi Elisa,

Hope you don't mind me chiming in on this one. I was also told that a SLO would qualify for the tax credit. Not so! With a SLO, the tenant/buyer has an option to purchase the property, not an obligation. Accordingly, the good ol' IRS does not consider a SLO to be a sale of property. No sale, no credit.

There are other creative ways to buy that would qualify for the credit, but the SLO is not one of them.

Hope this helps!

regards,

Bill

Bill is correct Elisa. The IRS is going to be tightening up on this. It is better to do a land contract or agreement for deed on these type of deals. Just be sure you get a closing statement. Just in case the buyer has to prove it.

Absolutely Jonathan!! The IRS has actually said that documentation must be attached to Form 5405, though I'm not sure if they have stated definitively what that documentation must be. Most tax pros seem to agree that it will be a copy of the HUD-1.