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Guide for Completing Form 8823 - page 106 / 197

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106 / 197

*Federal Subsidies for Buildings Placed in Service After July 30, 2008*

In addition:

  • a.

    The units used to satisfy the rules under IRC §42(i)(2)(E)(i) are also counted toward the project’s minimum set-aside under IRC §42(g)(1).

  • b.

    The rent restriction for all the low-income units, including the units used to satisfy the rules under IRC §42(i)(2)(E)(i), is based on the applicable income limitation under IRC §42(g). In this example, the imputed income limitation applicable to the units in the project is 60 percent of AMGI and the rent may not exceed 30 percent of that amount.

*See reference #1 at the end of the chapter for IRC §42(i)(2) as applicable to buildings placed in service prior to July 31, 2008.*

*For buildings placed in service after July 30, 2008, below market federal loans are no longer considered federal subsidies. Therefore, below market loans under HOME or NAHASDA are not federal subsidies. Under section 3002(b) of the Housing Assistance Tax Act of 2008, IRC §42(i)(2)(D) and (E) were removed.

See reference #2 at the end of the chapter for IRC §42(i)(2) as applicable to buildings placed in service prior to July 31, 2008.*

In Compliance

A new building receiving the 70 percent present value credit is in compliance if no federal subsidy is used (directly or indirectly) for the building or for its operation.

*Buildings Placed in Service Before July 31, 2008*

*If* a federal subsidy is used (directly or indirectly) for the building or for its operation, a building *receiving the 70 percent present value credit* is in compliance if (1) the taxpayer elected (on Part II, Form 8609) to reduce the Eligible Basis of the building *by the amount of the subsidy* and this reduction is properly reflected in the Eligible Basis determined at the close of the first year of the credit period, or (2) the federal subsidy is redeemed or paid before the building is placed in service. *A building using (directly or indirectly) the proceeds of a below market federal loan provided under the HOME or NAHASDA programs will not be considered a federally subsidized building as long as 40 percent or more of the residential units in the building are occupied by individuals whose income is 50 percent or less of AMGI.*

*Buildings Placed in Service after July 30, 2008

New buildings placed in service after July 30, 2008, may use the proceeds of a below market federal loan without being characterized as federally subsidized. However, the proceeds of tax-exempt bonds used (directly or indirectly) at any time for the building or its operation continue to characterize the building as federally subsidized.

If tax-exempt bonds are used (directly or indirectly) for the building or its operation, a building receiving the 70 percent present value credit is in compliance if the taxpayer elected (on Part II, Form 8609) to exclude from Eligible Basis of the building the

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Revised October 2009

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