Mortgage Daily Logo
mortgage news from industry experts

Down Payment Assistance Under Fire

Down Payment Assistance Under FireJustice Department seeks injunction against Partners In Charity

January 30, 2006

By LISA D. BURDEN
Washington, D.C., correspondent for MortgageDaily.com

The federal government is seeking an injunction against an Illinois-based downpayment assistance organization that it says wrongly promotes seller-paid assistance as tax deductible.The Department of Justice wants to stop Partners In Charity from telling home sellers and real estate professionals that payments made by sellers who participate in the program are tax deductible. The lawsuit is part of a federal crackdown on downpayment assistance organizations.

Under the program, the seller pays an amount equal to the buyer’s downpayment plus an administrative fee to the tax-exempt organization. Partners, like many others, then makes a grant to the homebuyer to cover the down payment and closing costs.

But the suit alleges the West Dundee company falsely advises property sellers they can claim a federal income tax deduction for the amount paid to the organization.

The complaint says the payments are not tax-deductible because they are compulsory under Partners’ program, not the result of generosity, and because they bring about sale of the seller’s house.

A significant number of sellers participating in the Partners program have reportedly claimed an improper charitable deduction on their federal income tax returns. The suit also asks the court to order Partners to provide the government with information on the sellers who are and have participated in the program including their names, addresses, telephone numbers and Social Security numbers.

The case is part of the Internal Revenue Service’s and Justice Department’s initiative to stop abusive tax schemes. The IRS announced late last year that it was investigating 11 similar groups. In a written statement, IRS Commissioner Mark W. Everson said the agency will not tolerate “schemes that mislead honest home sellers and tarnish the image of charities.”

The complaint against Partners was filed in federal court in Chicago.

Partners In Charity did not return calls for comment, but the sellers’ information page on the company’s Web site still says, “As a seller, you will generally receive an income tax deduction as selling expenses for fees paid for using the Partners In Charity program.”

A spokeswoman for the Department of Justice referred calls to the IRS. A spokesman for the IRS declined to comment further — explaining that the agency does not comment on ongoing litigation.


Lisa D. Burden is a legal analyst for MortgageDaily.com and holds a law degree from the University of Maryland. She is currently a freelance journalist who previously wrote for Institutional Investor publications and the Baltimore Daily Record.

e-mail Lisa at: burdenlisa@yahoo.com

Popular posts

How Long Does It Take to Refinance a Mortgage
How Long Does It Take to Refinance a Mortgage

So, you’re interested in refinancing your mortgage. Maybe you want some extra capital to do that home project you’ve always dreamed of, interest rates are nearing record lows, or you want to start consolidating debt. Regardless of the motivation behind the refinance,...

How Does Refinancing a Mortgage Work
How Does Refinancing a Mortgage Work

A home purchase is considered an investment, and a robust one at that. Savvy owners are constantly looking for new ways to reduce debt, save money, pay less in interest, and ultimately build equity. Refinancing is one way to leverage your investment and do just that....

What Does It Mean to Refinance Your Home
What Does It Mean to Refinance Your Home

You can think of refinancing your mortgage as a debt redo. Essentially, you’ll swap out the existing loan for a new one - ideally with better terms and conditions. Only this time it could help you save money on high mortgage payments, rather than just borrow it....

Setting up the Utilities in My New House
Setting up the Utilities in My New House

All the tedious, time-consuming home closing documents have been signed, sealed, and delivered. Your belongings are packed into what seems like a million boxes and you have a solid plan to haul all your existing furniture to the new place. Just as your boxes and...

When Is My First Mortgage Payment Due?
When Is My First Mortgage Payment Due?

Navigating your way through a brand new mortgage loan can be a difficult task, especially for first time homeowners. After handing over a large sum of money for the down payment and closing costs, it’s important to pay attention to the timing of your first mortgage...

Newsletter

Don’t worry, we don’t spam

calculate your monthly mortgage payment

Related Topics

Helpful Links

Daily mortgage rate trends

Best mortgage lenders

First-time homebuyers programs by state

Loan limits by state

Types of mortgages

APR vs interest rate

Understanding PMI

Related Posts

THE TRUSTED PROVIDER OF ACCURATE RATES AND FINANCIAL INFORMATION