PLR 200339009: Housing authority may use new area purchase price limits

Plain-English summary

A bond authority submitted sales data for new and existing single-family homes to support average area purchase price limits more precise than published safe harbors. The IRS accepted the authority's calculations and approved separate limits for the listed, anonymized areas. Those limits may be used for mortgage credit certificates and qualified mortgage bonds for no more than 30 months after the data period ended. Under IRC § 143(e), a home's acquisition cost generally must stay within 90 percent of the applicable average, or 110 percent in a targeted area.

Ruling snapshot

• Question: May the authority use its own documented area purchase price limits?
• Outcome: Approved for the listed areas and limited 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: 200339009
Washington, DC 20224
Release Date: 09/26/03
Index Number: 143.07-01 Person to Contact:

Telephone Number:

Refer Reply To:
CC:TEGE:EOEG:TEB-PLR-126000-03
Date:
June 24, 2003

Legend

Authority =

A =

B =

C =

D =

E =

F =

G =

H =

I =

J =

K =

L =

M =

N =

PLR-126000-03
2

O
=

P
=

Q
=

R
=

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, 2001 to December 31, 2001. The 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 No. OMB-03-04, dated June 6, 2003.

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 section 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                     $142,496                $102,219
          B                       171,030                141,725
          C                       200,370                182,360
          D                       132,008                118,891
          E                       282,157                212,788
          F                       114,936                102,360

PLR-126000-03
3

         G                         163,125                  116,684
          H                        108,148                  111,672
          I                        158,261                  151,837
          J                        102,700                   89,513
          K                        129,434                  116,452
          L                        140,503                  109,724
         M                         153,136                  152,244
          N                        125,306                  104,090
         O                         123,110                  107,248
          P                        109,954                   88,258
         Q                         129,906                  117,671
          R                        147,480                  121,299

In order to meet the purchase price requirement of section 143(e) of the Internal Revenue Code (“Code”), 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 average area purchase price limitation for purposes of issuing mortgage credit certificates under section 25 and qualified mortgage bonds under section 143 of the 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

PLR-126000-03
4

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,

Assistant Chief Counsel
(Exempt Organizations/Employment
Tax/Government Entities)

By:
Timothy L. Jones
Senior Counsel
Tax Exempt Bond Branch

cc: