Instructions For Form 5405 Draft - (Rev. December 2011) Page 3
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6When you convert your entire home to business
Specific Instructions
or rental use, you no longer use any part of it as
TIP
your main home. The home is used for business if
you use it for an activity that you carry on to make a
Part I. General Information
profit. The facts and circumstances of each case
Line B. Enter the date you purchased the home (or the
determine whether or not an activity is a business.
date you first occupied it if you constructed your main
home).
You repay the credit by including it as additional tax on
the return for the year you dispose of the home or it
Line C. See What To Attach to Your Return on page 2.
ceases to be your main home. However, if the home is
Line D. Check the “Yes” box if you (or your spouse if
destroyed or condemned, or you dispose of the home
married):
under threat of condemnation, and you do not acquire a
1. Were on qualified official extended duty (defined
new home within 2 years of the event, you must repay
below) outside the United States for at least 90 days
the entire repayment amount with the return for the year
during the period beginning after December 31, 2008,
in which the 2-year period ends.
and ending before May 1, 2010, and
2. Were a member of the uniformed services or
If you and your spouse claim the credit on a joint
Foreign Service or an employee of the intelligence
return, each spouse is treated as having been allowed
community (defined below) during the time period in (1)
half of the credit for purposes of repaying the credit.
above.
Exceptions. The following are exceptions to the
If you do not meet both (1) and (2) above, you cannot
claim the credit.
repayment rule.
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If you sell the home to someone who is not related to
Qualified official extended duty. You are on
you, the repayment in the year of sale is limited to the
qualified official extended duty while:
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amount of gain on the sale as determined in Part V of
Serving at a duty station that is at least 50 miles from
Form 5405. The amount of the credit in excess of the
your main home, or
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Living in Government quarters under Government
gain does not have to be repaid. (See item 9 under Who
orders.
Cannot Claim the Credit on page 2 for the definition of a
related person.)
Uniformed services. The uniformed services are:
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If the home is destroyed or you sell the home through
The Armed Forces (the Army, Navy, Air Force, Marine
Corps, and Coast Guard),
condemnation or under threat of condemnation, you do
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The commissioned corps of the National Oceanic and
not have to repay the credit if you purchase a new main
Atmospheric Administration, and
home within 2 years of the event and you own and use it
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The commissioned corps of the Public Health Service.
as your main home during the remainder of the 36-month
period.
Foreign Service member. For purposes of the
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credit, you are a member of the Foreign Service if you
If the home is destroyed or you sell the home through
are any of the following.
condemnation or under threat of condemnation to
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A Chief of mission.
someone who is not related to you and you do not
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An Ambassador at large.
acquire a new home within the 2-year period, the
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A member of the Senior Foreign Service.
repayment with your return for the year in which the
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A Foreign Service officer.
2-year period ends is limited to the gain on the
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Part of the Foreign Service personnel.
disposition as determined in Part V of Form 5405. The
amount of the credit in excess of the gain does not have
Employee of the intelligence community. For
purposes of the credit, you are an employee of the
to be repaid. (See item 9 under Who Cannot Claim the
intelligence community if you are an employee of any of
Credit on page 2 for the definition of a related person.)
the following.
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If the home is transferred to a spouse (or ex-spouse as
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The Office of the Director of National Intelligence.
part of a divorce settlement), the spouse who receives
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The Central Intelligence Agency.
the home is responsible for repaying the credit if, during
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The National Security Agency.
the 36-month period beginning on the purchase date, he
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The Defense Intelligence Agency.
or she disposes of the home or it ceases to be his or her
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The National Geospatial-Intelligence Agency.
main home and none of the other exceptions apply.
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The National Reconnaissance Office and any other
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Members of the uniformed services or Foreign Service
office within the Department of Defense for the collection
of specialized national intelligence through
and employees of the intelligence community (defined on
reconnaissance programs.
this page), and spouses of such individuals do not have
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Any of the intelligence elements of the Army, the Navy,
to repay the credit if, after 2008, they sell the home or the
the Air Force, the Marine Corps, the Federal Bureau of
home ceases to be their main home because they
Investigation, the Department of the Treasury, the
received Government orders to serve on qualified official
Department of Energy, and the Coast Guard.
extended duty (see the instructions for line 12 on page
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The Bureau of Intelligence and Research of the
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Department of State.
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If you die, repayment of the credit is not required. If
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Any of the elements of the Department of Homeland
you claimed the credit on a joint return and then you die,
Security concerned with the analyses of foreign
your surviving spouse would be required to repay his or
intelligence information.
her half of the credit if, during the 36-month period
Line E. Check the “Yes” box if you purchased the home
beginning on the purchase date, he or she disposes of
from a related person or a person related to your spouse.
the home or it ceases to be his or her main home and
none of the other exceptions apply.
Otherwise, check the “No” box.
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Instructions for Form 5405 (Rev. 12-2011)
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