rom 9405

Department of the Treasury
Internal Revenue Service

Recapture of Credit for Purchase or
Construction of New Principal Residence

b> Attach to Form 1040.

| 1980

Name(s) as shown on Form 1040

| Your social security number

1 Date you acquired the residence on which you claimed credit. (If self-constructed, date you first occupied

the residence.) . . 6. . ee
Date you sold the residence. (If this da

wo

Date you acquired the replacement resi

the amount from line 4.). . -

cy

5 Enter adjusted sales price of residence sold, from Form 2119, line9. . . 2 eee ee ee 5
6 Cost of replacement residence, from Form 2119, line 10 or 17. (If line 6 is equal to or more than line 5,

and you are the first occupant of the replacement residence, skip lines 7 and 8 and enter zero on line 9; you

do not have to recapture the credit)... 6 6 ee ee ee ee oe BU
7 Balance. (Subtract line 6 fromline5.). . . 6 2 ee ee es we oe 7
8 Divide amount on line 7 by amount online5. . «1 1 ee ee .

9 Credit you must recapture. (Multiply amount on line 4 by the figure on line

1040, line 36 and check “Form 5405"”

te

idence, (If self-constructed, check here

Amount of credit claimed on residence sold. See the exceptions in instruction A. If you qualify, do not fill
in the rest of the form; check here }» [] and explain >

box.

fe is more than 36 months after the date on line 1, do not complete
the rest of the form. You do not have to recapture any of the credit.) . a ee . sone
> [and give date construc-
tion began and date you occupied the residence. If you did not replace the residence within the replacement
period, OR are not the first occupant of the replacement residence, skip lines 5 through 8 and enter on line9

8.) Enter this amount on Form

A. Purpose of This Form.—lIf you re-
ceived a credit for buying or building a
new residence and then sold or disposed of
it within 36 months, you may have to re-
pay the credit by adding it back to your
Federal income tax. If so, fill in this form
and attach it to your Form 1040.

The 36-month period begins the day
after you got legal title or possession un-
der a purchase contract. If you built the
residence yourself, the period begins on
the date when you first occupied it as your
principal residence.

There are some exceptions. You do not
have to repay the credit if you disposed of
the residence under any of the following
conditions:

(1) Because of the death of anyone who
has a legal or equitable interest in the
property.

(2) After complete or substantial de-
struction by a casualty such as a fire,
storm, or earthquake.

(3) After an involuntary conversion such
as a condemnation.

(4) In a divorce settlement or legal sepa-
ration proceeding if one spouse keeps it
as a principal residence.

You also do not have to repay the credit
(or you have to repay only part of it) if you
buy or build a replacement residence that
meets the tests explained in Instruction B.

Instructions

B. Replacement Residence.—If you buy
or build a new residence to replace the
one on which you received the credit, you
may not have to repay any of the credit, or
you may have to repay only a part of it. To
qualify, the replacement residence must be
new, its original use must begin with you,
and you must buy or begin building it
within 18 months after the sale of the old
one. If you build your own replacement
residence, you have 24 months to con-
struct it. If you are in the U.S. Armed
Forces or outside the U.S. after the date
of sale, see Form 2119 instructions for a
longer holding period.

_, The amount of credit you must repay,
if any, depends upon the cost of the re-
placement residence.

(1) If the replacement residence cost
the same or more than what you sold the
original one for, you do not have to re-
pay the credit. For example, on August 4,
1976, you occupied a new self-constructed
house that cost you $40,000. You qualified
for the new home purchase credit and
claimed $2,000 credit on your 1976 in-
come tax return. On June 10, 1979, you
sold the house for an adjusted sales
price of $50,000. On June 16, 1980, you
bought a new house for $60,000. Since
the replacement house cost more than
what you sold the original house for, you
do not have to repay any of the credit
you received.

(2) If the replacement residence cost

less than what you sold the original one
for, you must repay part of the credit.
Add to your tax the part of the credit that
is proportionate to the part of the sales
price of the original residence that you did
not reinvest in the replacement residence.
For example, if you sold the original house
in the example above for $50,000 and
bought a new house for $40,000, you must
repay part of the credit. Figure this amount
in the following way:

(a) Figure the difference between the
adjusted sales price of the original house
and the cost of the new house. ($50,000—
$40,000 =$10,000.)

(b) Divide this amount by the sales
price of the original house. ($10,000+
$50,000=0.20.)

(c) Multiply your credit by the figure you
get in step (b). ($2,000 x0.20=$400.)

This is the amount ($400) that you must
add to your tax on your 1980 tax return.

C. When to Repay the Credit.—If you
must repay all the credit because you did
not replace your original residence with a
new one within the 18-month replacement
period, add it to your tax in the tax year
in which your replacement period ends.

If you must repay part of the credit be-
cause your replacement residence cost
less than the sales price of the original
residence, add it to your tax in the tax year
following the year you dispose of the origi-
nal residence.

313-213-1

‘$F US. GOVERNMENT PRINTING OFFICE : 198~O-313-213

Form 5405 1980)