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NON RESIDENT WITHHOLDING TAX FROM SELLING PROPERTY IN MD


KATHERINE
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Hi dear friends here,

Can any one help to understand the WITHHOLDING TAX paid during closing of a MD non-resident selling a house in MD?

Client was a nursing home resident in a nursing home in WASHINGTON, DC for since 2016.   He had a home in MD since 1961 with spouse (passed away in 1999).  He sold that house in 2021 prior of his date of death in 2021.  On the closing statement, I saw MD withholding tax for $60K paid to CIRCUT COURT.    I asked the daughter, she does not know what is that, and where is the money.    I searched a few places, found that non resident pays 8% of contact price to the comptroller as non resident withholding tax.   I want to know is:  when I file his MD tax return, (I prefer file as MD resident because he was in nursing home which should be treated as temp absent, right?), can I claim this $60K as prepayment and get the refund after offset the capital gain tax on the selling?

Thank you so much and wish every one has a wonderful day!

 

Kate

 

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You figured out the proper handling of the prepaid MD tax due to sale of the former home.

What I think you may thinking of incorrectly is that the care facility is considered temporary, that this home was still the client's permanent residence, or that he is a MD resident.  Temporary absences of short duration for rehab or recovery of illness is one thing, but a close to six-year stay probably isn't temporary.  If the physical or mental medical issues are such that these won't get better and client moved to the care facility with no intention of ever returning to his home, I don't see how you can file the way you described below.

On 7/28/2022 at 10:42 AM, KATHERINE said:

nursing home resident in a nursing home in WASHINGTON, DC since 2016

had a home in MD since 1961, sold that house in 2021 prior of his date of death in 2021

I prefer file as MD resident because he was in nursing home which should be treated as temp absent, right?

.

 

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1 hour ago, jklcpa said:

You figured out the proper handling of the prepaid MD tax due to sale of the former home.

What I think you may thinking of incorrectly is that the care facility is considered temporary, that this home was still the client's permanent residence, or that he is a MD resident.  Temporary absences of short duration for rehab or recovery of illness is one thing, but a close to six-year stay probably isn't temporary.  If the physical or mental medical issues are such that these won't get better and client moved to the care facility with no intention of ever returning to his home, I don't see how you can file the way you described below.

.

 

Hi Judy, I am uncertain on this as well.  I remembered that I read some where in the past that NYS does not take nursing home stay as days towards 184 days to determine residency, but I cannot find it now.   Of cause, now, we are talking about MD.  which is making it more confusing.    I did a lot searching, and still not clear on this.  Thank you! ---Kate 

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On 7/28/2022 at 11:30 AM, KATHERINE said:

Thank you all who put attention.  I just found out IT IS A PREPAYMENT and will claim back when file the tax return.  Thank you!

Here's the link for all the related MD forms.

In the future, you can prevent/reduce the withholding if you can file the correct form about a month before settlement. Also, you can request a refund if you don't want to wait until you file the tax return for that year.

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Thank you, Abby!  I was not there when they sell, now, I am filing MD return to claim it back.  I thought that is my biggest issue, but since Judy brought up my position in residency is questionable, which starts another problem now.  

Thank you!

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MD and DC have reciprocal agreements so filing as a resident or non-resident will have the same effect. 

Just for fun, did the wife die a few weeks before him and lived in the house in MD? That could make him a MD resident, right?

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1 hour ago, Pacun said:

did the wife die a few weeks before him and lived in the house in MD?

 

On 7/28/2022 at 10:42 AM, KATHERINE said:

Client was a nursing home resident in a nursing home in WASHINGTON, DC for since 2016.   He had a home in MD since 1961 with spouse (passed away in 1999).  He sold that house in 2021 prior of his date of death in 2021.

 

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Hi Judy, 

His wife passed away in 1999.  The only home is MD house bought in 1961, he passed away in Oct 2021, and the house was sold Jan 2021.   I got the house appraised as of her DOD.  He was in a DC nursing home since 2016 and stay there.   But all his tax doc still had his address in MD.   I still didnot decide his home state yet.  I read some where that NY wont count the days in NY nursing home stay towards the 184 days towards NYS resident test.   

Hope someone encountered this type case that the nursing home and home are in different states.

Thank you!

 

Kate

 

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2 hours ago, KATHERINE said:

Hi Judy, 

His wife passed away in 1999.  The only home is MD house bought in 1961, he passed away in Oct 2021, and the house was sold Jan 2021.   I got the house appraised as of her DOD.  He was in a DC nursing home since 2016 and stay there.   But all his tax doc still had his address in MD.   I still didnot decide his home state yet.  I read some where that NY wont count the days in NY nursing home stay towards the 184 days towards NYS resident test.   

Hope someone encountered this type case that the nursing home and home are in different states.

Thank you!

 

Kate

 

Thanks, I was actually answering Pacun who didn't read or remember the facts as you presented them.

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Katherine,

Quote

Resident of Maryland is an individual:

Whose permanent home is or was in Maryland (Domicile).

Whose permanent address is outside Maryland but you maintained a place of abode in MD for more than 6 months. You were physically present in the state for 183 days or more. (also known as a Statutory resident)

Nonresident of Maryland

An individual that is domiciled in a state other than Maryland (unless you are a statutory resident).

 

Your client can't be a statutory resident as he didn't spend the required # of days within MD, but you might want review MD's administrative statement from 2009 about "domicile" from its pdf:

ar_it37.pdf

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Thank you Judy!   I was thinking over and propose below treatment: 2016 & 2017: I will file MD resident because back then he was still movable and still wanted back to home when he can manage, during the staying in DC nursing, he went back a few times for personal matters.  Absent from home less than 2 years can take exception on nonqualified use of home when applying IRC 121.   Then, 2018-2021 he would file DC resident, pay the tax to DC after set off the credit from MD non resident tax. This position is upon he did not recover as wished and started to long term (permanent) staying in DC nursing home.  I have dates from clients and other written (government & third party documents) to show his intension to keep MD home as his only home.  Thank you all. :)

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On 8/5/2022 at 9:33 AM, KATHERINE said:

Thank you Judy!   I was thinking over and propose below treatment: 2016 & 2017: I will file MD resident because back then he was still movable and still wanted back to home when he can manage, during the staying in DC nursing, he went back a few times for personal matters.  Absent from home less than 2 years can take exception on nonqualified use of home when applying IRC 121.   Then, 2018-2021 he would file DC resident, pay the tax to DC after set off the credit from MD non resident tax. This position is upon he did not recover as wished and started to long term (permanent) staying in DC nursing home.  I have dates from clients and other written (government & third party documents) to show his intension to keep MD home as his only home.  Thank you all. :)

Sorry, I thought I resolved this, but I just found that DC may tax on everything, the client received federal government pension, it seems like only exclude up to $3000 from taxable income.   Can any friend from DC clarify this?  

Thank you!

Kate

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Thank you, Abby.  The issue is: the 1099R from federal government is 100% non taxable from MD, but DC , from what I read, they only allow exclude $3K.  DC allows 1099SSA 100% exempt from tax, not the 1099R.  Try to search any exception on government pension 1099R, but didont find yet.   (NY allows 100% exclusion on government 1099R).  

Thank you!

 

Kate

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