Many want to know and ask if it is OK to claim the credit if they sell or have sold to a family member in an Arms-Length Transaction.
I keep getting questions and upset commenters on my blog about land contracts being OK in Michigan for the $8000.00 tax credit.
What is an Arms-Length Transaction?
Investopedia Says:
The concept of an arm's length transaction commonly comes into play in the real estate market. When determining the fair market value of a piece of property, the price for the property must be obtained through a potential buyer and seller operating through an arm's length transaction, otherwise, the agreed-upon price will likely differ from the actual fair market value of the property.
A transaction among parties, each of whom acts in his or her own best interest.
This would include a father-son, mom and kids, relatives, wife to husband with a different last name.
For instance, if I wanted to sell my house to Christa and Bob, I would sell it at a lower price than to a normal buyer.
You would do the same right?
The rules for claiming the land contract tax credit are fine, but they still must follow the law that you must do a Arms-Length Transaction to get the credit.
It is sad to read the 98 comments where many ask this question about selling to a relative in an Arms-Length Transaction and wanting to claim the credit.
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