I am in escrow, selling a CA rental condo, and I do not know how to complete Form 593. I do not know if I qualify for exemptions for tax purposes. Can someone help?

[ktma548385]

I do not know if I have a loss or zero gain for CA income tax purposes, which would be an exemption.  And if I do not have an exemption, I am supposed to complete Part VII on the form.  Should I take the 3 1/3 sales price method?

[Vanessa A]

You would need to look at your numbers to determine if you have a loss or zero gain.  If you sold the condo for less than your adjusted basis, then you would have a loss.  If you sold it for the same as your adjusted basis, then you would have a zero gain.

Your adjusted basis is the amount you paid for the home plus any improvements to the house. You would subtract that from your selling price to determine whether or not you have a gain or a loss.

So before you decide anything else, you will need to figure out if you have a gain or a loss. 

[ktma548385]

Thank you for your response.  If only improvements affect the adjusted basis, then I am making a profit.  However, if HOA special assessments, selling expenses, and repairs count, then maybe I will be at a loss. 

I am fairly certain I am going to gain overall, so I believe I have no exemptions.  In which case, it looks like I have to complete Part VII.  I don't know how to answer #34:  "Amount that SHOULD have been withheld" - and I don't know whether I should select Sales Price Method 0.333% calculation or the Individual 12.3% Gain on Sale calculation.  What are the implications of each?

I am still in escrow, so I haven't really sold anything yet, which is another thing that is confusing me.  Why do I have to compute all these numbers now, when this is for 2023 tax season?

[Vanessa A]

Those questions are unanswerable until you know all your numbers. 

Where are you having to compute these numbers?  In TurboTax?  If so, you should not be reporting the sale on this years return.  If you were asked did you dispose of this property, you should have answered no since you did not dispose of it in 2021.

[ktma548385]

My escrow company requires me to complete and return to them CA Form 593 Withholding Statement now, before escrow closes.  If I understand the exemption rules correctly, I will have a gain.  

[Carl]

If you are in escrow "right now" in 2022, I don't see how that affects your 2021 tax return. Just sayin'.

[ktma548385]

It does not affect my 2021 return at all.  I have already filed my 2021 return.

I am required to submit this Form 593 NOW to my escrow company BEFORE I close escrow in 2 weeks, but I don't know how to complete the form.  I am asking for help on how to answer the form questions so I can meet my closing requirements.