Coming up with the down payment for a home purchase can be a big hurdle. If you are straining to get the money together, be careful because the IRS is targeting down payment scams.
Down Payment Scams The IRS is Hunting
Charitable organizations do not pay taxes. This occurs when an organization is qualified by the IRS as an exempt charity under section 501c3 of the tax revenue code. While most charitable organizations are legitimate, some are really just business that have strained and bent the rules to gain the tax exempt status. The IRS frowns upon such organizations and usually moves to shut them down.
Currently, the IRS is looking at over 180 tax exempt organizations that provide down payment assistance to homebuyers. Specifically, the IRS is looking at a seller financing strategy that it deems to be questionable. The strategy works where a buyer does not have enough money to make the required down payment demanded by a lender. The seller agrees to give the money to a charitable organization in exchange for a tax deduction. The organization then makes a loan to the buyer for the amount required to fund the down payment. Specific strategies vary, but...
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