CA Form 593, Real Estate Withholding Statement

[dyogim]

Seller originally purchased home for $310K in 2011. House is now being sold for the balance of the loan, $245K. However, the sale price is $600K. The amount of equity is being gifted to the buyer. The buyer will be using the equity to pay for the down and any additional closing cost. The title company has asked the seller to complete the CA Form 593. Since the  house was/is the seller's primary residence for the past several years, will the seller be exempt from any tax withholdings from either the sale price or gain amount?

Can the seller choose "...seller has a loss or zero gain..." since he is not receiving any funds from the sale?

[JotikaT2]

It depends.

If the seller lived in the home as his primary residence for two years out of the last 5 years, then he can potentially exclude some or all of the gain.

The first $250,000 of gain is excluded from income ($500,000 if you are filing jointly.)

As I understand the question, the sales price of the home is $600,000.  The basis in the home is $310,000.  This would be the amount used to determine the gain.  Based upon this, the gain would be approximately $290,000 as there will be selling expenses.

But it sounds like the seller is not receiving anything above the loan amount of $245,000, which is being transferred to the buyer.  If this is the case, the sales price would include the value of the mortgage assumed by the buyer, as well as any other possible items included below:

If this is the case, there may be a loss on the sale of the residence.  If this is true, there would not be anything to report on the tax return.

I have included a link to Publication 523, which provides more detail on figuring out the gain or loss on the sale of your home.

Publication 523