Taxpayers owned a personal residence on their farm until 4/1/06. On 4/1/06 the taxpayers gifted the farm home (personal residence) and the rest of the farm building site to their son. The taxpayers did not request but the son placed a provision in the property transfer documents that allowed the taxpayers to continue to live in the home for up to 10 years. The taxpayers continued to live in the home. The taxpayers are now buying a personal residence in town and will move out of the farm home. Does the provision that allowed the taxpayers to live in the farm home for up to 10 years create a problem for the taxpayers wanting to claim the first time home buyer credit?

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>>a provision in the property transfer documents that allowed the taxpayers to continue to live in the home for up to 10 years<<

It rather sounds like they are not eligible for the credit because they retained possession and ownership privileges according to the deed. Section 36 does not refer only to full title in fee simple. It says,

The term "first-time homebuyer" means any individual if such individual (and if married, such individual's spouse) had no present ownership interest in a principal residence during the 3-year period ending on the date of the purchase of the principal residence to which this section applies.

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