Loan (property puchase)

[Guest cascigm]

Can a participant under the "purchase of pimary residence" safe harbor borrow to buy property that home will be built on? Wants to amortize for 10 yrs.

[david shipp]

The home loan exception to the five year repayment rule provides that the five year limit "shall not apply to any loan used to acquire any dwelling unit . . ." (sec. 72(p)(2)(B)).

Purchase of land to build on doesn't appear to fit the bill.

For what it's worth, an National IRS representative also expressed the belief that a loan to cover the materials to build a house would not qualify for a longer pay-back period where the borrower was going to build the house himself. His reasoning was that the dwelling unit couldn't be acquired until it was built.