My wife and I bought a home in December 2009 for $248,000 and then sold it in June 2012, for $239,600. We got the $8,000 credit in 2009, but didn't complete 3 years there as we had to move because of a change in job. Generally, the homeowners are supposed to pay back the entire Tax Credit if they did not live in the house for at least 36 months.
IRS webiste mentions however, that there are some exceptions to it. If the house was not sold to a related party and if it was sold at a loss the Tax Credit could be waived. How does IRS define a related party? In our case, we did not sell the house to anyone we were related to and also sold it at a loss. Does this mean we can have Tax Credit waived? Do we still have to file form 5405?