California 593 and selling 2 properties together

[dresslered]

Hello, while we were living in California we bought a vacation home in 2004 for $350,000.  Later in 2015, we bought vacant land near the vacation home for $13500 so that we had special HOA amenities.  In 2020 we moved to Idaho selling our main residence but kept our vacation home and vacant lot.

Currently, we have decide to sell the California vacation home and vacant lot together as one for $562,500.  We are currently in a quick escrow.  What led me to ask this question right now is that the Title Company has handed me a 593 to fill out prior to closing (I didn't realize that I would be figuring out my 2024 taxes so early!).

My first question would be as to how do I enter this transaction in TurboTax?  Is it listed as a single sale or does it need to be broken out?  There were many improvements that would increase my basis on the home whereas no improvements were made on the vacant land. 

The second question would be as to how accurate does the 593 have to be?  Does it have to match my tax return that I file in 2024 (obviously my tax return next year would include both Idaho and California State filings).  The title company has not even given me estimated closing costs yet nor have I fully figured out my cost basis on the vacation home yet.  Any help would be much appreciated.

[pk · Accepted solution]

@dresslered  California collects/withholds  taxes on the transfer of a property at source i.e. at the time of closing.  This done through then use of form 593.   If you look at the form , you will see that it is  asking for details  of the transaction and "roughly" the  gain in the transaction without considering your  taxable income as a whole i.e.  the transaction  in isolation.

It  then computes the  tax on this income ( the gain ) at a nominal rate  -- think now its is 3.3% .  This tax is  withheld and then transmitted to the  state by the closing entity/ title company.    One thing to note is that  when you file your tax return for California ( next year )  you need to include this  withholding as  amount " withheld" not as "estimated" payment.  I made that mistake and learned the hard way.

You do not need to compute  your 2024  tax return to file the form 593.

Does this help ?

[UncleSamPayer]

Thanks for the reply but I am still having difficulty finding out how I enter the two properties together.  On the form 593, it is asking for the original purchase price (line 16).  Do I enter the sum of the original purchase price of the house and lot together and then the combined selling price for both (line 13) as a single transaction?  My hesitation is that when I do my taxes next year, TurboTax will likely ask me for the purchase dates.  Would I just then enter the purchase date of the house and then the sale date of both?  I'm really having difficulty finding information on this.  Thanks.

[UncleSamPayer]

Sorry for the mixup in names, I apparently have two login accounts (dresslered and UncleSamPayer).

[pk]

@UncleSamPayer  sorry I forgot to close the loop on  the two assets  being sold together to a single buyer.

Since you bought  these at two different times, unless you have  converted these to a single  tax id -- i.e. replatted the properties,   you are actually selling two distinct assets to a buyer.  Therefore there should be two  titles searches,  and two sales docs ( HUD-1s or equivalent).  In such  a case  the  selling price would be allocated between the two props.   Threfore when you file the return  in 2025 April, you will show twp assets sold with two acquisition dates and basis.

If on the other hand you had the properties replatted  and therefore a single  tax id,  you may have to  use the acquisition of the  second plot  as an "improvement " and thus adding to your basis.  Your original acquisition date remains as actual.

That is my view.   Is there more I can do for you ?

pk

[UncleSamPayer]

Perhaps it would be a good strategy to wait and see how the Title Company issues the 1099-S?  If they issue two (one for each property), I will treat them separately and if they issue only one, I will treat them together.  The vacant lot isn't a capital gain for the property, only a perk for the new owner getting exclusive private club access.  I would only enter the original purchase price of the lot to that of the home.

Thank you for all your help.