Looking for a De4 Form Templates? Download it for free!

Form 597-W, Part I, certifying an exemption

office is permanently staffed by its

*The maximum tax rates are 9.3% for

of withholding does not eliminate the

employees.

individuals and 8.84% for corporations.

requirement that the seller must file a

5. The seller is a partnership or LLC and

In this example, the withholding amount

California income tax return to report the sale

the recorded title to the property is in

would be reduced to $4,650. If the documen-

and pay any tax due.

the name of the partnership or LLC. A

tation provided shows that the estimated tax

The seller should answer “Yes” in Part I when:

partnership includes a syndicate, group

liability will be $0 from the sale, a full waiver

pool, joint venture, or other unincorpo-

will be granted.

1. The total sale price of the California real

rated organization through which the

property is $100,000 or less.

• The transaction involves an IRC

business operation is carried on and

Section 1031 exchange, a foreclosure, or

2. The seller is a California resident on the

which is not a corporation, trust, or

an installment sale; or

date escrow closes. A California resident

estate. A partnership or LLC may be

• The transaction involves multiple sellers,

is any individual who is in California for

required to withhold on distributions of

some of whom are nonresidents of

other than a temporary or transitory

California source income to nonresident

California.

purpose or any individual domiciled in

partners or members. For more informa-

California who is absent for a temporary

Note: The withholding amount is 3 1/3% of

tion, get FTB Pub. 1017, Nonresident

or transitory purpose. Sellers who are

the total sale price regardless of the percent-

Withholding Partnership Guidelines.

uncertain of their residency status can get

age of interest owned in the property.

6. The seller is exempt from tax under

assistance by calling the FTB at

To receive a prompt determination, include all

either California or federal law.

(800) 852-5711 or by getting FTB

required information and documentation to

Pub. 1031, Guidelines for Determining

7. The seller is a California irrevocable

support your request. Failure to include the

Resident Status, for more information.

trust. For withholding purposes, an

required information, signatures, and

irrevocable trust is considered a California

3. The property qualifies as the seller’s

documents can result in either a delay or

trust if at least one trustee is a California

principal residence under IRC

denial of your request. Below is a list of the

resident. Irrevocable trusts are required to

Section 121. The home in which you live

minimum documentation required for the FTB

withhold on distributions of California

is your principal residence. You can only

to make a determination. Do not send original

source income to their nonresident

have one principal residence at a time. If

documents.

beneficiaries. Note: If the seller is a

you have two homes and live in both of

This is a general guide. Additional information

revocable/grantor trust and one or more

them, the principal residence is the one

may be requested on a case-by-case basis.

of the grantors is a nonresident, with-

you lived in most of the time. Even

• Loss or Small Gain

holding is required. If all of the grantors

though you do not currently live in the

of a revocable/grantor trust are residents

The current sale escrow document

property, it may still qualify as your

of California, no withholding is required.

(estimated closing statement or closing

principal residence for purposes of the

statement).

withholding exemption. An example is a

8. The seller is a California estate. For

Purchase escrow document (closing

former California resident who moved out

withholding purposes, an estate is

statement) from the original

of state prior to the close of escrow. The

considered a California estate if the

transaction.

property can qualify for the withholding

decedent was a California resident at the

List of any improvements and related

exemption if it qualifies for the exclusion

time of death. Estates are required to

costs.

of income under IRC Section 121. An

withhold on distributions of California

individual can exclude up to $250,000 (up

source income to their nonresident

• Inherited Property

to $500,000 for a married couple) of the

beneficiaries.

The current sale escrow document

gain on the sale of a principal residence.

9. The seller is a bank or a bank acting as

(estimated closing statement or closing

Sellers can qualify for this exclusion if,

the fiduciary for a trust.

statement).

during the 5-year period ending on the

The court documents showing the fair

10. The seller is an insurance company,

date of the sale, they owned and lived in

market value of the property at the time

IRA, or a federally qualified pension or

the property as their principal residence

of inheritance, or the death certificate if

profit-sharing plan.

for at least 2 years. For examples and

the death occurred less than one year

more details, get federal Publication 523,

D Nonresident Withholding

ago.

Selling Your Home, by accessing the

Waiver Request (Part II)

If the property was inherited more than

Internal Revenue Service’s (IRS) website

two years ago, also:

at: or by calling the IRS at

This section should be completed if you do

(800) 829-3676.

State whether the property was a

not meet any of the exemptions to withhold-

rental. If yes, state how long it was

4. The seller is a corporation that is

ing as shown in Part I and you believe that

rental property.

qualified through the California

your estimated tax liability from the sale will

List any improvements since the date

Secretary of State to do business in

be less than the required withholding.

of inheritance and related costs.

California or has a permanent place of

Waiver requests are handled on a case-by-

business in California immediately after

• IRC Section 1031 Exchange

case basis. Generally, the FTB will reduce or

the transfer. A corporation has a

eliminate the withholding amount when:

Completed and signed California

permanent place of business in California

Form 597-E, Nonresident Withholding

• The 3 1/3% withholding amount exceeds

if it is organized and existing under the

Exchange Affidavit.

the estimated California tax liability from

laws of California or if it is a foreign

The current sale escrow document

the sale; for example:

corporation qualified to transact intrastate

(estimated closing statement, or

Selling Price . . . . . . . . . . . . . . . . $250,000

business by the California Secretary of

closing statement).

Withholding Rate . . . . . . . . . . . . . x 3.33%

State. A corporation that has not qualified

On Form 597-E indicate the basis of the

Withholding Amount . . . . . . . . . . $ 8,325

to transact intrastate business, such as a

property being sold.

corporation engaged exclusively in

Gain on Sale . . . . . . . . . . . . . . . $ 50,000

On Form 597-E indicate the state where

interstate commerce, will be considered

Maximum Tax Rate . . . . . . . . . . . . 9.3%*

the replacement property is located.

as having a permanent place of business

Estimated Tax Liability . . . . . . . . $ 4,650

in California only if it maintains a

permanent office in California and the

Form 597-W

Page 3

(REV 2000)

California Form 597-W - Withholding Exemption Certificate And Nonresident Waiver Request For Real Estate Sales - 2000 Page 3

Related Articles

Related forms

Related Categories