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wjdh
New Member

CA non-resident, co-owned home sale withholding and capital gains

I assisted my retired, senior mother (who is single) in buying a home in California and am listed as a co-owner on the title. (I am a resident of another state where I own my own home.)  We are now selling my mom's house, which has appreciated ~$300K gross and ~$200K net (factoring in renovation and closing costs).   I am intending to take no profit or loss on the home, as this was an exercise to assist my mom in affording a home in a high-cost area and not as an investment or a second home for me.  My forthcoming 1099S reflects my gross proceeds as equal to half of the original purchase price, while my mom's 1099S reflects their half of the original price plus the ~$300K appreciation.  The distribution of post-escrow proceeds to each party will mirror these percentages as well.  I understand my parent to be exempt from CA Form 593 withholding and federal/state capital gains as it was their primary residence for more than 2 yrs and net gains were <$250K.   In filling out my separate CA Form 593, can I claim a withholding exemption since I intend to realize no individual capital gain?  If so, how would I represent the computation in Part VI?  My REEP (ie, the escrow agent) insists I must use the full sales amount (vs my share) in Line 13 Selling Price, which inevitably leads to showing the full ~$200K gain and a subsequent withholding (albeit at an amount prorated to my ownership %).  This seems to be due to the form's calculations assuming that my % share of the purchase price and % share of the sales price are equal vs. being based on a static dollar amount.  Or do I need to just submit the withholding and then look for a refund when filing a CA nonresident tax return?  (My only CA-based income would be the house sale, and I've never resided a day in CA.)  And in that case, will the relevant forms allow me to show my individual share of the purchase and sales prices to be equal and therefore offsetting?  

 

1 Reply
rjs
Level 15
Level 15

CA non-resident, co-owned home sale withholding and capital gains

Even if you do not intend to have a profit on the sale of the home, the fact is that you will have a profit. You are a half owner of the home, and half the proceeds of the sale are yours. Since it is not your principal residence, you do not qualify for any exclusion of gain.


Before you proceed with the sale, I strongly recommend that you immediately consult a California tax professional for advice on how to handle your gain on the sale, and what your California reporting requirements are. Your situation is too complex, and there is too much money involved, to rely on anonymous advice on the internet.

 

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