Karen Lee Posted January 20, 2014 Report Share Posted January 20, 2014 Have a client that lives here in Washington State but have a piece of property in CA that was given them by a relative. It is being sold so I can only assume that there would be a CA tax return that needs to be done. Is there anyone out there that would like to either help me or have me refer them to you for the CA portion? They will be here in about an hour. Thanks Karen Quote Link to comment Share on other sites More sharing options...
Pacun Posted January 20, 2014 Report Share Posted January 20, 2014 It is being sold so ... If it is being sold, you will have to deal with it next year or the following year, whenever it is sold. Quote Link to comment Share on other sites More sharing options...
Mr. Pencil Posted January 20, 2014 Report Share Posted January 20, 2014 I can only assume that there would be a CA tax return that needs to be done. Yes, it is definitely taxable to California. The rules are probably the same as federal (unless there's a reason to adjust California basis, such as an energy credit). There is no tax break for capital gains rates, so prepare your client for a shock as California hits her at the highest rate for her world-wide income, probably about 10%. Also, California will withhold a big chunk--3.3% of sales price unless she calculates and declares a lesser gain amount before signing off. Your software should do Form 540NR with little trouble. You won't have to register in California to e-file from Washington. Quote Link to comment Share on other sites More sharing options...
BulldogTom Posted January 20, 2014 Report Share Posted January 20, 2014 Agree with Mr. Pencil. The client should know that there is no Capital Gains tax in CA. It is all ordinary income. That can be a shock to the uniformed. Tom Hollister, CA Quote Link to comment Share on other sites More sharing options...
Max W Posted January 21, 2014 Report Share Posted January 21, 2014 This biggest problem with these RE gifts by relatives is determining the basis, as records rarely exist. Quote Link to comment Share on other sites More sharing options...
Karen Lee Posted January 21, 2014 Author Report Share Posted January 21, 2014 If it is being sold, you will have to deal with it next year or the following year, whenever it is sold. Yes it is a 2014 transaction. Quote Link to comment Share on other sites More sharing options...
Karen Lee Posted January 21, 2014 Author Report Share Posted January 21, 2014 Yes, it is definitely taxable to California. The rules are probably the same as federal (unless there's a reason to adjust California basis, such as an energy credit). There is no tax break for capital gains rates, so prepare your client for a shock as California hits her at the highest rate for her world-wide income, probably about 10%. Also, California will withhold a big chunk--3.3% of sales price unless she calculates and declares a lesser gain amount before signing off. Your software should do Form 540NR with little trouble. You won't have to register in California to e-file from Washington. Thank you for the info. Very helpful. Quote Link to comment Share on other sites More sharing options...
Karen Lee Posted January 21, 2014 Author Report Share Posted January 21, 2014 Agree with Mr. Pencil. The client should know that there is no Capital Gains tax in CA. It is all ordinary income. That can be a shock to the uniformed. Tom Hollister, CA Thanks... Quote Link to comment Share on other sites More sharing options...
Karen Lee Posted January 21, 2014 Author Report Share Posted January 21, 2014 This biggest problem with these RE gifts by relatives is determining the basis, as records rarely exist. There doesn't seem to be a problem here since the house was built by one of the giftees and the land purchased immediately prior to construction. Good records for a change. Quote Link to comment Share on other sites More sharing options...
Mr. Pencil Posted January 21, 2014 Report Share Posted January 21, 2014 There doesn't seem to be a problem here since the house was built by one of the giftees and the land purchased immediately prior to construction. In that case you DO have a problem, which I already mentioned. It sounds like she will have little taxable gain, but she still faces a huge withholding anyway. It's based on sale price. She needs to contact her escrow officer about making an election, and there are still plenty of escrow officers who have their own procedures or just plain don't know how it works. Meanwhile you need to get her records and accurately calculate her gain. Here is a general link that will refer you to more detail and forms. https://www.ftb.ca.gov/individuals/wsc/California_Real_Estate.shtml 1 Quote Link to comment Share on other sites More sharing options...
Karen Lee Posted January 21, 2014 Author Report Share Posted January 21, 2014 In that case you DO have a problem, which I already mentioned. It sounds like she will have little taxable gain, but she still faces a huge withholding anyway. It's based on sale price. She needs to contact her escrow officer about making an election, and there are still plenty of escrow officers who have their own procedures or just plain don't know how it works. Meanwhile you need to get her records and accurately calculate her gain. Here is a general link that will refer you to more detail and forms. https://www.ftb.ca.gov/individuals/wsc/California_Real_Estate.shtml Have a 2014 593-E in front of me with Withholding Amount calculated. 1 Quote Link to comment Share on other sites More sharing options...
BulldogTom Posted January 21, 2014 Report Share Posted January 21, 2014 Have a 2014 593-E in front of me with Withholding Amount calculated. You are miles ahead of the game. Make sure your client's escrow company files it properly. You have just earned your fee for the client. Tom Hollister, CA 1 Quote Link to comment Share on other sites More sharing options...
Recommended Posts
Join the conversation
You can post now and register later. If you have an account, sign in now to post with your account.