8000 tax credit

i have a membership ownership in a homeowners association which gives me the right to occupy my current/primary residence.  i intend to sell this membership interest - the house - and buy a new house (with a conventional mortgage and ownership in land).  i would like to know if the home owners association membership qualifies me as a home-owner and exempt from the new 8000 first time homeowner tax credit.

with the HO association, i do not own the land and was not able to obtain a conventional mortgage due to this fact and the fact that the banks do not consider me as having purchased a home - only a membership.

thanks

What you describe is also commonly called a housing cooperative, in which you don't directly own the home or apartment in which you live, but rather own stock or membership interest in the organization that owns the property and that stock or membership interest gives you a right to live in one of the apartments or homes as your residence.

Under Treas. Reg. § 1.121-1(b)(1), a housing co-op interest is considered to be an interest in a personal residence. That means the sale of your member interest in the coop will qualify for the exclusion of gain (up to $250,000 or up to $500,000 if married and filing a joint return) under Internal Revenue Code (IRC) § 121, assuming that you owned that interest and lived in the coop unit for at least two of the five years immediately preceding the date of sale and you've not sold another property in the last two years that qualified for that exemption.

But it also means you are not a first-time homebuyer for the up to $8,000 first-time homebuyer credit under IRC § 36. In order to qualify for that credit, you must not have owned an interest in a personal residence at any time in the 3 years preceding the date of purchase. Under IRC § 36, personal residence means the same thing as it does under IRC § 121. Thus, your ownership of the coop interest is an interest in a personal residence for the purpose of IRC § 36 and will disqualilfy you from this credit.

I don't know what this membership ownership business means.

Doesn't matter what the banks think.

If you got a deed to a condo or townhouse, you're a homeowner and would not qualify. If you got a shareholder agreement in a co-op, you're a homeowner and would not qualify.

If you've got something else going on, you'll have to provide a better explanation because right now "homeowners" association means you either own the home or somebody else does and you are a tenant.

Very strong odds are this constitutes your residence as defined in Sec 121----there might be some narrow exceptions under state law if your membership interest did NOT constitute an interest in some fixed property--for example a mobile NOT attached to land or footing might be an exception in some states---but your example is an unlikley exception ---if you were a member of some group which guarantees you a unit upon demand but not necessarily the same unit each time --like hotel room shares --that might be an exception under state law.

Drew:

there might be some narrow exceptions under state law if your membership interest did NOT constitute an interest in some fixed property--for example a mobile NOT attached to land or footing might be an exception in some states-

The definition of personal residence for the purpose of this credit and for the gain exclusion are set by the federal tax code, not state property law. If, as it appears, the poster is in a co-op housing arrangement, he will not qualify as a new homeowner for the credit.

Thank you very much.  It is clear that I do not qualify for the credit.