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When did withholding start for California residents?

The withholding law applies to dispositions of California real

estate by both residents and non-residents which close on and

after January 1, 2003. Previously, withholding was only

required of non-resident sellers.

Why was this withholding law enacted?

attempting to balance the state budget, this withholding

provision was added to legislation on the last day of the

Legislative session in 2002. It was estimated to accelerate

collection of $285 million in additional state revenue.

Who is responsible for withholding?

buyer (called the transferee) to withhold from what would

otherwise be paid to the seller.

What unit at the Franchise Tax Board handles the

Section handles the withholding. The phone number is (888)

792-4900 and information can be found on their website at:

http://www.ftb.ca.gov/individuals/index.html#wh.

You may check the Franchise Tax Board website both to see

the gross sale price. It does not take into account costs of the

sale such as real estate commissions or other settlement costs.

Withholding is currently due by the 20th day of the calendar

month following the date title is transferred or may be

remitted on a monthly basis in combination with other

transactions closed during that month. California Forms 593

and 593B are used to report and a remit copy must be

provided to the seller to attach to their tax return.

What exemptions apply?

property, the buyer will not have to withhold from your

proceeds if the sale price is less than $100,000, or you are

selling your principal residence or if you are selling at a

loss. Other exemptions are for tax deferred exchanges and

involuntary conversions of property.

Does the seller have to do anything to qualify for

statement under penalty of perjury to establish eligibility for

the exemption.

Does the seller have to do anything to qualify for

statement under penalty of perjury to establish eligibility for

the exemption.

Can the seller apply to the Franchise Tax Board for an

withholding and waivers but not by individuals, only by

corporations and other entities.

What happens if there are several sellers on title?

purchase price exceeds $100,000.00, withholding rules

apply. To determine the amount of withholding, each owner is

considered separately and the withholding is calculated on each

owner's pro-rata share of sales proceeds. It is possible for the

transaction to be exempt for one seller but not for the other part

owners.

How do I know if the property qualifies as my principal

Section 121 to determine whether the property qualifies as a

principal residence. There are two separate exemptions under

California law which relate to the use and ownership tests

under Section 121. Generally, the seller will either have had to

have owned and lived in the property for two of the previous

five years or the last use will have to have been as the seller's

principal residence. Note that the two year period may be

made up of different blocks of time which add up to two years

over the five year period. A seller who lived in the property for

one year, then rented it out for a period of time followed by

another year of residency in the property would qualify for the

exemption.

What is the role of the escrow holder regarding

notice of the requirements. The escrow holder cannot make a

legal determination as to whether any exemption applies.

Will the escrow agent do the withholding of the seller's

withhold and remit to the Franchise Tax Board if the parties

agree. The fee for this service may not exceed $45.00.

How will a seller get the withholding returned?

way to recover the withholding is by filing a California State

Income Tax Return for the year in which the sale

occurred. The seller will be entitled to a refund in the amount

that the withholding exceeds the amount of capital gains tax

due by reason of the sale.

Does it matter if the seller lost money on other real estate or

considered separately.

What happens if the property is held in trust?

revocable, then the rules apply as if the seller was the

individual who has the power to revoke the trust. If the trust is

irrevocable then the trust itself is treated as the seller and

withholding may be required if there are no exceptions.

What type of real estate is covered by the law?

estate interests are covered unless one of the exemptions

applies. This means the sale of fee title or easements or other

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What is an Uninsured Deed?

Most common problems from Uninsured Deed's come from

Quitclaim deeds between family members, especially husband

and wife. When a person is added to title, it is a window of

opportunity for matters against him/her to attach to the property.

Why Should it be of Concern to you when taking a listing?

• Is it a divorce situation?

• Was it signed in distress?

• Possible bankruptcy?

How can you spot an uninsured deed when you order a

• Look for accommodation stamp.

• No title company or title company title order number.

• No escrow number showing on document.

• No document stamp showing under the fee section.

• Handwritten document.

• Time recorded is not 8:00 am in the morning.