IRS uncovers fraud and abuse of homebuyer tax credit
... and should we be surprised.
From the "could have told you this would happen" files, the IRS has uncovered tens of thousands of fraudulent cases of people claiming the $8k first time homebuyer tax credit.
From WSJ:
"Some 580 filers under 18 years of age had claimed almost $4 million in first-time home-buyer credits, including one that was just 4 years old. “Contract law generally exempts children under the age of 18 from being bound by the terms of a contract,” Mr. George said in written testimony. “Therefore, it is unlikely that these taxpayers would have entered into an arm’s-length transaction for the purchase of a home.”
Some 74,000 tax credit claims worth $500 million came from taxpayers who had indications of prior home ownership within the preceding three years.
Another 19,300 tax returns in 2008 were filed claiming the credit for a home that had not yet been purchased. Those credits totaled more than $139 million." (emphasis added)
While estimates vary on how effective the tax credit has been and the actual cost per home sold as a result of the credit, you should never underestimate how many people will scheme to try and get away with something.