California Withholding Tax Alternative Upon Transfer of Property - This law applies ONLY if you are selling INCOME PRODUCING PROPERTY (see exemption #1 below.)
This new law provides an alternative to the current California withholding tax requirement upon transfer of real property of paying three and one-third percent of the sales price on real estate for non-exempt transactions. Under this law, if withholding is required, the seller can opt to pay the top-tier (under corporate or individual state tax laws) on any recognized gain on the sale of the real property.
Currently, the law requires the payment of three and one-third percent (3 1/3%) as withholding on the transfers of real estate on properties which do not qualify for an exemption. Some of the more common exemptions, among others provided in the statute, are:
(1) sale of a PRINCIPAL RESIDENCE;
(2) sale as part of a 1031 EXCHANGE;
(3) LOSS on the sale of property;
(4) sales price of $100,000 OR LESS;
(5) a CORPORATION with a permanent place of business in CALIFORNIA.
Under the new law, if the transferor is not exempt from withholding at the time of the sale/transfer, the transferor can opt to withhold the maximum tax rate (under either individual tax rates or corporation tax rates) on the actual gain on the transferred property instead of the three and one-third percent. Such withholding would be done under penalty of perjury which would be subject to the penalty of the greater of (i) $500 or (ii) 10% of amount required to be withheld, in addition to the withholding plus any interest, fees and other penalties.
This law amends California Revenue & Taxation Code §§ 18662 and 18668 and goes into effect on January 1, 2007.
See what's going on in the Antelope Valley. Visit my charts by CLICKING HERE
To find the value of your home or see what homes are for sale in the Antelope Valley go to my web site by CLICKING HERE
When you Think Real Estate, Think the Gockel Group!
Comments(0)