Arthur L. Rubin" <ronnirubin[at]sprintmail.com> wrote:
- quote -

Rate is 3 1/3 %. An individual is subject to withholding.
Various exemptions from withholding include any one of the
following:
1. Sales price is $100,000 or less.
2. Sale of personal residence as defined by IRC Sec. 121.
3. Loss or zero gain under CA law.
4. Involuntary conversions.
5. Like kind exchanges except for boot.

A seller who qualifies for any of the above except #1, must
certify on Form 593-C to avoid withholding. #1 is an
automatic exemption.

#2 refers to the 2 out of 5 year rule and includes the
special circumstances exceptions.

All of the above relates to tax year 2004. There are
changes for 2005 that I have not read as yet. However, based
on news reports it appears that they have added a last use
rule for personal residences that eases the 2 out of 5 rule.

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Arthur L. Rubin wrote:

- quote -

OOPS. I think the transaction being at a loss IS adequate.
my mistake.

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Prop. 60 allows the homebuyer to purchase a home that costs
105% of the price of the sold home one year after selling
the home and up to 110% of the price 2 years later.
Otherwise the home must be of equal or lesser value. I have
a client in San Bernardino County who has this situation.
These figures came from the SB County assessor's website and
I assume are common throughout CA with the Counties that are
in conformance. SB requires that both homes be in SB County.

CA still will require a resident seller to fill out the form
to avoid withholding on the sale of any real estate.
Withholding is not made on sales of personal residences or
on properties sold at a loss. One of my clients sold her
home in CA and moved to Texas. I had to write a letter to
the escrow company stating that the home was being sold at a
loss. Any commercial property or SFH not used as the
personal residence will have withholding even for a
resident. Another client sold a home in San Fernando Valley
and bought a new home in Truckee (Lake Tahoe), CA. There was
withholding on the sale. Both properties are in CA and all
owners are CA residents.

Linda Dorfmont E.A., CFP, CSA

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A.G. Kalman wrote:
- quote -

This changed relatively recently, perhaps in the last 3
years. CA will withhold 3% of the selling price unless the
seller is a non-resident and applies for, is eligible for,
and receives a waiver, or is a resident and the transaction
is tax-exempt. The transaction being non-reportable because
the gain is excluded in full by the $250,000/$500,000 limit
is adequate. The transaction being at a loss is not
adequate.

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Linda Dorfmont at DORFMONT[at]aol.com wrote on 10/8/04 10:40 AM:

- quote -

Thanks for the reply.

I will follow up on the withholding form.

As to your second item - unfortunately, she moved to an
assisted living facility instead of buying another
residence.

John

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....Also the property tax basis can be transferred to the new
home if it is more expensive, if your mother is over a
certain age and the counties conform to this practice. This
can keep property taxes low for seniors on fixed incomes.

LD,

The new property must have a purchase price valued lower
than the one being sold to transfer the Prop 13 basis from
the original property. Maybe that's what you meant?

For those not familiar with CA real estate that may be
confusing but it works to the advantage for the majority.
The purpose is to encourage downsizing by those who don't
need the big house any more. It also lets the government
start collecting the BIG taxes on the property sold.

BC

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Linda Dorfmont wrote:

- quote -

Withholding only applies to nonresidents. This person moved
to Paso Robles, CA and is still a CA resident.

- quote -

The new residence must be equal to or lower in price
than the one sold. See the below link for a complete
set of rules for Propositions 60 & 90:
http://www.lacountyassessor.com/extr.../prop6090.aspx

--
Alan
http://taxtopics.net

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D. Stussy at kd6lvw[at]bde-arc.ampr.org wrote:
- quote -

I should have included more information.

SHE did buy the house, in the 1950's, but married after
buying the house.

She and her spouse have occupied that house as their
principal residence since the 1950's, and have not had any
residence sales.

Thanks for the reply.

John

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Arthur L. Rubin at ronnirubin[at]sprintmail.com wrote:
- quote -

Thanks for the reply. Those were the answers I was hoping
for!

John

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CA will also try to withhold 3.3% of the SELLING PRICE
unless your mother fills out a form provided by the escrow
company stating that she is selling her personal residence.

Also the property tax basis can be transferred to the new
home if it is more expensive, if your mother is over a
certain age and the counties conform to this practice. This
can keep property taxes low for seniors on fixed incomes.

Linda Dorfmont EA, CFP, CSA

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jw wrote:

- quote -

How do you get $500k if SHE is (not "they are") the owner?

- quote -

Yes, if reported on the federal return. California conforms
FULLY for the sale of residence (even with the lookback to
1997 for military - per a recent conforming bill that got
signed into law).

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jw wrote:

- quote -

Yes.

- quote -

No -- provided it would not have to be reported on the
Federal return with California facts. (It's possible for
there to be be California depreciation without there being
Federal depreciation -- since May 5, 1997.)

- quote -

No. She will have to file a Federal gift tax return,
though.

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I don't prepare any California returns, so I'd like to check
with those who do.

My wife's mother has moved from her long-time residence in
LA to Paso Robles.

She wants to sell the house - for about $330,000 - and give
half to proceeds to each of her daughters.

Does California follow the federal rules on house sales? In
other words, is the first $500,000 of gain excluded on a
joint return, if all federal requirements are met?

Does the sale have to be reported on the California return
at all?

Will California require any kind of reporting of the gifts
to the daughters?

Anything else I should know about California rules for these
transactions?

Thanks.

John Burtch, CPA
Albuquerque NM

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