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Ann Arbor Real Estate Blog

Blog about Ann Arbor and Saline Michigan

Arms Length Transactions and the $8000.00 Tax Credit

The Tax Credit

Many want to know and ask if it is OK to claim the credit if they sell or have sold to a family member not in an Arms-Length Transaction in Michigan.

I keep getting questions and upset commenters on my post 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?

It is family.

Arms Length and Land Contracts,

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.

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2 thoughts on “Arms Length Transactions and the $8000.00 Tax Credit

  1. So if a first time home buyer doesn’t qualify for the $8,000 tax credit for buying a house for the first time, does there next house they buy from arms length qualify as a first time home buyer tax credit in the future?

Thoughts?

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