Page 34 - English CA Buyer Seller Guide
P. 34
Taxes - continued
F I R PTA – F O R E I G N I NVE STO R S R EAL • Escrow can charge a fee for processing withholding
PROPERTY TAXATION ACT
or waiver
• Requires 10% of sales price be withheld for foreign
• Escrow cannot charge for giving written notice to
ownership
parties or obtaining 593 C and 593 W Certifications
• Applies to nonresident aliens of USA, including
CAL WITHHOLDING EXEMPTIONS FOR
foreign partnerships, foreign trusts and foreign estates I N D IVI D UALS
• Buyer's responsibility to report and withhold, not the • Property is seller's principal residence under IRC 121
• Total sales price is $100,000 or less
escrow officer • The seller will incur a loss on the sale for California
• Exceptions under Internal Revenue Code (IRC Income Tax purposes (must use FTB form 593 E)
1034): Sales price not over $300,000 and buyer will • Nonrecognition rules apply
use the property as principal residence • Simultaneous or delayed exchange pursuant to IRC
• Seller can request a waiver or reduced withholding Section 1031
on Form 8288 B (tax identification number required) • Installment sales when the buyer agrees to withhold on
• Payment and Forms 8288 and 8288 A are due within each principal payment
20 days of closing (tax identification number required) • The property is being involuntarily converted and will
• IRS penalties are steep if forms and/or payment are qualify for nonrecognition of gain for California
Income Tax purposes under IRC Section 1033
received late
CAL WITHHOLDING EXEMPTIONS FOR
CAL–WITHHOLDING – ADDITIONAL NON I N DIVI DUALS ON LY
CALIFORNIA WITHHOLDING
• Corporation
• Requires that 31⁄3% of sales price or the alternative • Partnership
• Limited Liability Company (LLC) with certain
withholding amount be paid to the Franchise Tax Board
requirements
• The alternative withholding amount is the amount of
• Tax Exempt Entity (church, charity, school, etc.)
estimated gain from line 16 on FTB Form 593 E, • Sale by estates when the property was the decedent's
multiplied by 9.3% for individuals. Other percentages
apply to corporations. principal residence
• Applies to non owner-occupied property • IRAs, Pension Funds, Insurance Companies
• Prepayment of California state income tax for sellers • The seller will incur a loss on the sale for California
on the taxable gain of California real property Income Tax purposes
• Requires the buyer to withhold 31⁄3% of the total sales • Simultaneous or delayed exchange pursuant to IRC
price or the alternative withholding amount Section 1031
• Buyer's responsibility to report and withhold; it can be • The property is being involuntarily converted and will
passed onto escrow qualify for nonrecognition of gain for California
Income Tax purposes under IRC Section 1033
• Escrow must inform buyer of the responsibility
(in escrow general provisions)
• Escrow must accept responsibility if buyer requests it
• Payment and Form 593 and 593 B to FTB by 20th day
of month after closing
• Interest due on all late payments (FTB calculates, and
interest can be substantial)
34
F I R PTA – F O R E I G N I NVE STO R S R EAL • Escrow can charge a fee for processing withholding
PROPERTY TAXATION ACT
or waiver
• Requires 10% of sales price be withheld for foreign
• Escrow cannot charge for giving written notice to
ownership
parties or obtaining 593 C and 593 W Certifications
• Applies to nonresident aliens of USA, including
CAL WITHHOLDING EXEMPTIONS FOR
foreign partnerships, foreign trusts and foreign estates I N D IVI D UALS
• Buyer's responsibility to report and withhold, not the • Property is seller's principal residence under IRC 121
• Total sales price is $100,000 or less
escrow officer • The seller will incur a loss on the sale for California
• Exceptions under Internal Revenue Code (IRC Income Tax purposes (must use FTB form 593 E)
1034): Sales price not over $300,000 and buyer will • Nonrecognition rules apply
use the property as principal residence • Simultaneous or delayed exchange pursuant to IRC
• Seller can request a waiver or reduced withholding Section 1031
on Form 8288 B (tax identification number required) • Installment sales when the buyer agrees to withhold on
• Payment and Forms 8288 and 8288 A are due within each principal payment
20 days of closing (tax identification number required) • The property is being involuntarily converted and will
• IRS penalties are steep if forms and/or payment are qualify for nonrecognition of gain for California
Income Tax purposes under IRC Section 1033
received late
CAL WITHHOLDING EXEMPTIONS FOR
CAL–WITHHOLDING – ADDITIONAL NON I N DIVI DUALS ON LY
CALIFORNIA WITHHOLDING
• Corporation
• Requires that 31⁄3% of sales price or the alternative • Partnership
• Limited Liability Company (LLC) with certain
withholding amount be paid to the Franchise Tax Board
requirements
• The alternative withholding amount is the amount of
• Tax Exempt Entity (church, charity, school, etc.)
estimated gain from line 16 on FTB Form 593 E, • Sale by estates when the property was the decedent's
multiplied by 9.3% for individuals. Other percentages
apply to corporations. principal residence
• Applies to non owner-occupied property • IRAs, Pension Funds, Insurance Companies
• Prepayment of California state income tax for sellers • The seller will incur a loss on the sale for California
on the taxable gain of California real property Income Tax purposes
• Requires the buyer to withhold 31⁄3% of the total sales • Simultaneous or delayed exchange pursuant to IRC
price or the alternative withholding amount Section 1031
• Buyer's responsibility to report and withhold; it can be • The property is being involuntarily converted and will
passed onto escrow qualify for nonrecognition of gain for California
Income Tax purposes under IRC Section 1033
• Escrow must inform buyer of the responsibility
(in escrow general provisions)
• Escrow must accept responsibility if buyer requests it
• Payment and Form 593 and 593 B to FTB by 20th day
of month after closing
• Interest due on all late payments (FTB calculates, and
interest can be substantial)
34
