HAR § 18-235-6 — (3) A transfer shall qualify under this section if the entire interest in the housing account is transferred to a new housing account and the original account is closed and terminated

A participant shall not have more than one account at any one time. The funds in an account to be transferred shall be promptly transferred from one financial institution or credit union to another. Any use of the funds for any purpose other than the purchase of a first principal residence in the interim shall be treated as a withdrawal not used for a first principal residence and shall be included in gross income and made subject to the additional tax. (4) The housing account into which the funds have been transferred shall terminate 120 months from the date the earliest account was established and the written trust agreement shall so provide. The participant shall inform the new trustee that the deposit is a transfer of a housing account, rather than a new account, and the date of the first deposit to the original account. (5) The trustee of the account to be transferred shall not be subject to the withholding requirements of this section if it received a written declaration from the participant of the participant’s intention to transfer the account. The trustee shall make the instrument of payment payable to the new trustee, either alone or jointly with the participant. The trustee within ten days shall file a copy of the declaration with the director of taxation and shall note thereon the date the funds have been transferred and shall identify the lending institution to which the funds have been transferred. (u) Tax treatment upon the subsequent sale or conveyance of residential property which was purchased with a housing account distribution. (1) In General. Upon the sale or conveyance of residential property which was purchased with a housing account, an amount equal to the original distribution and an additional ten per cent of the distribution shall be included in the gross income of the individual. (2) Sale due to death or total disability of the participant or the participant’s spouse. There shall be no tax liability where the residential property purchased by a housing account has been sold due to the death or total disability of a participant or the participant’s spouse.