PLR 200147051: Local home price limits approved for mortgage programs

Plain-English summary

A housing authority submitted sales data for new and existing single-family homes to set average area purchase prices for mortgage credit certificates and qualified mortgage bonds. The IRS concluded that the authority's data were more accurate and complete than those used for the published safe harbor and approved the area-specific figures listed in the letter. A home's acquisition cost generally had to stay within 90 percent of the applicable average, or 110 percent for a targeted area residence. The authority could rely on the approved figures for no more than 30 months after the end of its 1999 data period. The ruling did not decide other tax consequences of the programs.

Ruling snapshot

• Question: Could the authority use its own average area purchase prices for mortgage assistance limits?
• Outcome: Approved for the listed areas and the stated reliance period.
• Key authorities: IRC §§ 25, 143(e); Temp. Treas. Reg. § 6a.103A-2(f)(5)(i).

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury

Number: 200147051
Washington, DC 20224
Release Date: 11/23/2001
Index Number: 143.07-01
Person to Contact:

Telephone Number:
(202) 622-3980
Refer Reply To:
CC:TEGE:EOEG:TEB-PLR-124075-01
Date:
August 28, 2001

Legend

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Dear:

This replies to your ruling request on behalf of the Authority concerning the use of average area purchase price limitations based upon more accurate and comprehensive data than that used to calculate the safe harbor limitations published in Rev. Proc. 94-55, 1994-2 C.B. 706. The Authority submitted data concerning sales of new single-family residences for certain metropolitan statistical areas and for all other areas for the 12-month period from January 1, 1999 to December 31, 1999. The
PLR-124075-01
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Authority also submitted data concerning sales of existing single-family residences for certain metropolitan statistical areas and for all other areas for the same period. The data submitted conforms with the definitions for the nation’s metropolitan statistical areas established in office of management and Budget Bulletin 99-04, dated June 30, 1999, and effective June 30, 1999.

Based on the information submitted and representations made, we conclude that the calculations submitted by the Authority, in the cases of new and existing single- family residences are based upon more accurate and comprehensive data than that used for calculating the limitations published in Rev. Proc. 94-55, and may be used by the Authority as provided by § 6a.103A-2(f)(5)(i) of the Temporary Income Tax Regulations.

Accordingly, the following are the new average area purchase price safe harbor limitations for single-family residences justified by the documentation received:

  Statistical Area         New Housing        Existing Housing
         A                      $126,377                $101,041
         B                        179,913                128,795
         C                        183,763                160,760
         D                        123,007                108,015
         E                        115,157                 92,190
         F                        142,276                106,582
         G                        126,202                 99,721
         H                        142,846                137,093
         I                        222,462                177,550
         J                        111,667                102,006
         K                        114,179                 95,726
         L                         66,377                 78,724

In order to meet the purchase price requirement of § 143(e), the acquisition cost of a single family residence may not exceed 90% of the applicable average area purchase price, except in the case of a targeted area residence, where the acquisition cost may not exceed 110% of the applicable average area purchase price. The figures approved above may be relied upon for a period of not more than 30 months following the termination date of the 12-month period used by the Authority to compute the
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average area purchase price limitation for purposes of issuing mortgage credit certificates under § 25 and qualified mortgage bonds under § 143 of the Internal Revenue Code (“Code”).

Except as expressly provided herein, no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter.

This ruling is directed only to the taxpayer(s) requesting it. Section 6110(k)(3) of the Code provides that it may not be used or cited as precedent.

In accordance with the Power of Attorney on file with this office, a copy of this letter is being sent to the taxpayer.

The rulings contained in this letter are based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party. While this office has not verified any of the material submitted in support of the request for rulings, it is subject to verification on examination.

Sincerely yours,
Assistant Chief Counsel
(Tax Exempt/Government Entities)
By: Timothy L. Jones
Assistant Branch Chief
Tax-Exempt Bonds Branch

Enclosure (1)