Here in California, and in my own local area of La Quinta and the Palm Springs Valley, Canadian Sellers MUST know the rules! (Courtesy of WCR President's Message, 2014)
The general Rule is the IRS requries the purchaser of any foreign owned property to wihhold 10% of the sales price for the IRS and an additional 3.3% of the sales price for California State taxes.
All Canadian and foreign investors must procure a taxpayer ID# with the form W-7. Do this Early (at least 1 month is estimated to get the ID#!)
Secondly, form 8288-B, CA state forms 593 & 540nR, as well as tax returns, must be submitted to the IRS, along with a copy of the sales contract. (The IRS may take up to 8-12 weeks to return an approved withholding certificate.)
What I've learned as the Agent for a foreign owned property? Tell Escrow early. Be sure the Sellers have a foreign ID#! If they don't, direct them to a local entity to help them.
Exceptions: Of course!
1. Purchase price is $300,000 or less AND the buyer will reside in the property.
2. When there is ZERO realized in the transaction by the Seller.
If you're a Canadian or foreign investor selling in the Palm Springs Valley, prepare your documents BEFORE you close!