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Law Educator, Esq.
Law Educator, Esq., Attorney
Category: Legal
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Experience:  JA Mentor -Attorney Labor/employment, corporate, sports law, admiralty/maritime and civil rights law
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We live in Arizonia and are buying a home in California for

Customer Question

We live in Arizonia and are buying a home in California for our daughter and family. We have encountered the CAL-FIRPTA (CA law AB 1338, Chapter 02-488 of Revised Revenue and Taxation Code 18662). This law indicates a 3 and 1/3% of the sales price that may be withheld. What are the implications of this law to us as an out of state buyer? Does it make a difference if we buy the home as a second home or and investment (rental) property?
Submitted: 4 years ago.
Category: Legal
Expert:  Law Educator, Esq. replied 4 years ago.

The tax applies to both resident and non-residents selling investment properties. The tax does not apply to the sale of a primary residence. The following are the exemptions to the tax withholding:

The seller signs an affidavit under penalty of perjury stating that the property is the seller's principal residence within the meaning of IRC §121. (C.A.R. Standard Form AS January 2003 version* or California tax form 593-C satisfies this affidavit requirement. See Question 35 for how to obtain California tax forms.); or

The seller signs an affidavit under penalty of perjury stating that the property is part of an IRC §1031 exchange (but only to the extent of the amount of gain not required to be recognized for California income tax purposes under IRC §1031) (C.A.R. Standard Form AS, January 2003 version* or California tax form 593-C); or

The seller signs an affidavit under penalty of perjury stating that the property has been involuntarily or compulsorily converted and the seller intends to acquire property similar or related in service or use in order to be eligible for nonrecognition of gain for California income tax purposes under IRC §1033 (C.A.R. Standard Form AS, January 2003 version* or California tax form 593-C); or

The seller signs an affidavit under penalty of perjury stating that the transaction will result in a loss for California income tax purposes (C.A.R. Standard Form AS, January 2003 version* or California tax form 593-C); or

The sales price of the property does not exceed $100,000; or

The buyer does not receive written notification of the withholding requirement from the "real estate escrow person." (See Questions 19 and 20); or

The property is acquired by a corporate beneficiary under a deed of trust or mortgage through judicial or nonjudicial foreclosure or by a deed in lieu of foreclosure. See: CA Tax Code 18662(e).

 

 


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