The Maryland Mw506Ae form is a document designed to apply for a Certificate of Full or Partial Exemption from the withholding requirements on proceeds from the sale of real property and associated personal property by nonresident individuals and entities in Maryland. This form is crucial for those seeking to navigate the tax implications of property sales within the state, ensuring compliance with Maryland's taxation laws. For individuals and entities looking to understand and utilize this form correctly, it's essential to know the specific requirements and deadlines to ensure a timely and accurate submission.
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Embarking on the sale of real estate and associated personal property in Maryland can present certain complexities, especially for nonresident individuals and entities. Navigating these waters becomes considerably smoother with the Maryland Form MW506AE in hand. This document, formally known as the Application for Certificate of Full or Partial Exemption for the tax year 2011—or any other specified tax year—serves as a lifeline for those wishing to claim exemption from withholding requirements on proceeds from such sales. To be considered for this exemption, the form stipulates a submission deadline to the Comptroller of Maryland no later than 21 days before the scheduled closing date of the property transaction. Detailed within are sections for the transferor or seller to outline their personal information, a comprehensive description of the property in question, detailed financial facets of the property sale, and the critical reasons qualifying the transaction for a full or partial withholding exemption. Not to be overlooked, this form also caters to adjustments on the basis of ownership through various lawful channels, including inheritance or business entity transfers, clearly guiding applicants through each step with specific instructions and required documentation. Moreover, the form underscores the importance of its meticulous completion and attests to the seriousness of its content by requiring signatures under the penalty of perjury. The final decision made by the Comptroller of Maryland on whether to issue or deny the certificate—and the subsequent determination of the taxable amount, if applicable—is final and beyond appeal. Through its structured arrangement, the Form MW506AE ensures clarity in proceedings and aids in facilitating a smoother transaction process for nonresident sellers in Maryland.
2011
MARYLAND
FORM
MW506AE
Application for Certificate of
Full or Partial Exemption
For Calendar Year 2011 or other tax year
Beginning ________________ , 2011 and Ending ________________
DO NOT WRITE OR STAPLE IN THIS SPACE
NOTE: This form is to be used only to request a Certificate of Full or Partial Exemption from the withholding requirements on the proceeds of the sale of real property and associated personal property in Maryland by nonresident individuals and nonresident entities. This form must be RECEIVED by the Comptroller of Maryland, Revenue Administration Division, NRS Exemption Requests, P.O. Box 2031, Annapolis, MD 21404-2031 no later than 21 days before the closing date.
Transferor/Seller’s Information
Name (If joint, give first names and initials of both)
Last Name
Your Social Security Number
Name (Corporation, Partnership, Trust, Estate, etc.)
Spouse’s Social Security Number
T/A or C/O or Fiduciary
Federal Employer I.D. Number
Current Address (Number and street)
City, State and Zip Code (province, postal code and country)
Transferor/Seller’s Entity Type
Ownership Percentage
Individual
S Corporation
Business Trust
Estate
Partnership
Other:
Trust
Limited Liability Company
______________________________________
_____________________________ %
C Corporation
Limited Liability Partnership
Property Information
Description of Property (Include street address, county, or district, subdistrict and lot numbers if no address
Date of Closing
is available)
Contract Sales Price
Property Account ID Number (if known)
Transferor/Seller Acquired Property By
Transferor/Seller’s Adjusted Basis:
Purchase
1031 Exchange
Purchase price/Inherited value $ ______________________________
Gift
Foreclosure/Repossession
(see instructions)
Inheritance
Other: _____________________________
Add: capital improvements
and settlement costs
______________________________
Use of Property at Time of Sale:
Rental/Commercial
Vacant land
Less: depreciation (if any)
Secondary/Vacation
Adjusted basis:
$ ______________________________
Length of time used for this purpose: Years ___________ Months ________
Transferee/Buyer’s Information
Address (Number and street)
City, State and Zip Code (province, postal code, and country)
Transferee/Buyer’s Entity Type
Limited Liability Parntership
_____________________________________
COM/RAD-306 (Rev. 12/10)
MARYLAND FORM
Application for Certificate of Full or Partial Exemption
Page 2
Transferor/Seller’s Name
Your Social Security Number/FEIN
Reason for Full or Partial Exemption from Withholding
(Attach documentation and calculation)
1.☐ Transfer is of a principal residence as defined in IRC §121.
2.☐ Transfer is a tax-free exchange for purposes of IRC §1031 and is treated as:
☐simultaneous without boot,
☐simultaneous with boot, or
☐delayed, with funds in escrow for acquiring replacement property.
3.☐ Transfer is pursuant to an installment sale under IRC §453 and the transferor/seller will receive less than the full purchase price during the taxable year.
4.☐ Transfer of inherited property is occurring within 6 months of date of death.
5.☐ Transferor/Seller is receiving zero proceeds from this transaction.
6.☐ Transfer is pursuant to a transaction under a specific section of the Internal Revenue Code or other code. Place code letter for your transaction in the box below. (See instructions for detailed descriptions):
☐
7. ☐ Other. Provide a brief explanation in the space provided:
Calculation of Tax to be Withheld
1.
Enter the amount subject to tax witholding. Subtract adjusted basis from contract sales price
2.
Enter tax rate, whichever applies.
a. If you are a business entity, enter 8.25%
........................................................... .......................................
b. If you are an individual, enter 6.75%
...........................................................
3.
Amount of tax to be withheld at closing. Line 1 multiplied by line 2. (This line MUST be completed.)
1
2
3
Please
Sign
Here
Under the penalties of perjury, I declare that I have examined this application, including any schedules or statements attached, and to the best of my knowledge and belief, it is true, correct and complete. If prepared by a person other than taxpayer, the declaration is based on all information of which the preparer has any knowledge.
_____________________________________________
___________________________
Signature
Applicant’s phone number
Date
(Rev. 12/10)
INSTRUCTIONS FOR APPLICATION FOR
CERTIFICATE OF FULL OR PARTIAL EXEMPTION
The Comptroller’s decision to issue or deny a certificate and the amount of tax is final and not subject to appeal.
GENERAL INSTRUCTIONS
Purpose of Form
Use Form MW506AE to apply for a Certificate of Full or Partial Exemption from the withholding requirements on the proceeds of the sale of real property and associated personal property in Maryland by nonresident individuals and nonresident entities. A nonresident entity is defined to mean an entity that: (1) is not formed under the laws of Maryland; and (2) is not qualified by or registered with the Department of Assessments and Taxation to do business in Maryland.
Who May File an Application
An individual, fiduciary, C corporation, S corporation, limited liability company, or partnership transferor/seller may file Form MW506AE. Unless the transferors/ sellers are a husband and wife filing a joint Maryland income tax return, a separate Form MW506AE is required for each transferor/seller.
IMPORTANT: The completed Form MW506AE must be received by the Comptroller of Maryland no later than 21 days before the closing date of the sale or transfer to ensure timely receipt of a Certificate of Full or Partial Exemption.
The Comptroller’s decision to issue or deny a Certificate of Full or Partial Exemption and the determination of the amount of tax to be withheld if a partial exemption is granted are final and not subject to appeal.
SPECIFIC INSTRUCTIONS
Enter the tax year of the transferor/ seller if other than a calendar year.
Enter the name, address and identification number (Social Security number or federal employer identification number) of the transferor/ seller applying for the exemption.
If the transferor/seller was issued
an individual taxpayer identification number (ITIN) by the IRS, enter the ITIN.
Check the box indicating the transferor/seller’s entity type.
Enter the transferor/seller’s ownership percentage of the property.
Enter the description of the property, including the street address(es) for the property as listed with the State Department of Assessments and Taxation (SDAT), including county. If the property does not have a street address, provide the full property account ID numbers used by SDAT to identify the property.
Enter the date of closing for the sale or transfer of the property.
Enter the contract sales price of the property being sold or transferred.
Enter the property account ID number, if known. If the property is made up of more than one parcel and has more than one property tax account number, include all applicable property account ID numbers.
Check the box that describes the transferor/seller’s acquisition of the property. Check the box that describes the transferor/seller’s use of the property at the time of the current sale, and enter the length of time
the property has been used for this purpose.
Complete the transferor/seller’s adjusted basis section by entering the purchase price when the transferor/ seller acquired the property, adding the cost of capital improvements (including acquisition costs such as commissions and state transfer taxes), and subtracting depreciation, if applicable. If inherited property, use the Date of Death value of the property.
Enter the name and address.
Check the box indicating the transferee/buyer’s entity type.
Attach schedule if there are multiple transferees/buyers.
Check the box in the “Reason for Exemption” column that indicates the reason you are requesting a full or partial exemption from the income tax withholding requirements.
Specific Line Instructions for Reason for Full or Partial Exemption
Line 1. Transfer is of your principal residence as defined in §121 of the Internal Revenue Code, which means it has been your principal residence for two of the last five years.
Required Documentation: Copy of contract of sale or copy of estimated HUD-1 settlement sheet; copy of HUD-1 settlement sheet from purchase of property, if claiming settlement expenses as part of adjusted basis; and receipts and invoices for any capital improvements you are claiming.
Line 2. Transfer is a tax-free exchange for purposes of §1031 of the Internal Revenue Code.
Required documentation: Letter signed by the qualified intermediary, or by the person authorized to sign on behalf of a business entity acting as the qualified intermediary, which states the name(s) of the transferor(s), the property description, that the individual or business will be acting as the qualified intermediary for
the transferor(s) as part of a §1031 exchange of the property, whether there will be any boot, and if so, the amount of boot. The amount of any boot must be stated on the application as the taxable amount.
Line 3. Transfer is pursuant to an installment sale under §453 of the Internal Revenue Code.
Required documentation: Copy of contract of sale or copy of HUD-1 settlement sheet; copy of promissory note to transferor which will be executed by transferee at settlement. That portion of the total payment that the transferor receives at or within sixty (60) days of settlement must be stated on the application as the taxable amount.
Line 4. Transfer of inherited property is occurring within 6 months of date of death.
Required Documentation: Provide a copy of the death certificate and a copy of the estimated HUD-
1 settlement sheet from the title company.
Line 5. Transferor/seller is receiving zero proceeds from this transaction.
Required Documentation: A copy of a letter from the transferor/seller to the title company advising they are to receive zero proceeds from the sale and advising to whom the proceeds are to go; a copy of the acknowledgment letter from the title company to the transferor/seller.
Line 6. Transfer is one of the following transactions. Please note the code letter and record it in the box on page 2 of Form MW506AE.
a. Transfer is to a corporation con- trolled by the transferor for purposes of §351 of the Internal Revenue Code.
Required documentation: Copy of the agreement of sale; Certificate of Good Standing of transferee is- sued by the state in which transferee is incorporated; notarized affidavit executed on behalf of transferee by its President and its Treasurer stating that immediately after the exchange the transferor(s) will own stock in the transferee possessing at least eighty percent (80%) of the total combined voting power of all classes of trans- feree’s stock entitled to vote and at least eighty percent (80%) of the total number of shares of all other classes of stock of the transferee; and an apprais- al establishing the fair market value,
at the time of the exchange, of any
property other than stock in the trans- feree which is part of the consideration for the exchange. The fair market value of any such other property and/or any money which is part of the con- sideration for the exchange must be stated on the application as the taxable amount.
b. Transfer is pursuant to a tax-free reorganization as described in §361 of the Internal Revenue Code.
Required documentation: Copy of agreement governing the transfer between transferor and transferee; Cer- tificates of Good Standing of transferor and transferee issued by the state(s) in which transferor and transferee are incorporated; copy of the plan or reor- ganization showing that transferor and transferee are parties to the reorgani- zation; and an appraisal establishing the fair market value, at the time of the exchange, of any property other than stock or securities in the transferee which is part of the consideration for the exchange and will not be distribut- ed by the transferor in pursuance of the plan of reorganization. The fair market value of any such other property and/or any money which is part of the con- sideration for the exchange must be stated on the application as the taxable amount.
c. Transfer is by a tax-exempt entity for purposes of §501(a) of the Internal Revenue Code and transfer involves limited or no unrelated business tax- able income under §512 of the Internal Revenue Code.
Required documentation: Copy of determination by the Internal Revenue Service that transferor is a tax-exempt entity for purpose of §501(a) of the Internal Revenue Code; Certificate of Good Standing of transferor issued by the state in which transferor is incorpo- rated; notarized affidavit executed on behalf of transferor by its President and by its Treasurer stating that the transfer involves limited or no unrelated busi- ness income under §512 of the Internal Revenue Code.
d. Transfer is to a partnership in exchange for an interest in the part- nership such that no gain or loss is recognized under §721 of the Internal Revenue Code.
Required documentation: Copy of agreement governing transfer between transferor and transferee; copy of the partnership agreement of the trans- feree.
e. Transfer is by a partnership to a partner of the partnership in accor- dance with §731 of the Internal Rev- enue Code.
Required documentation: Copy of agreement governing transfer between transferor and transferee; copy of the partnership agreement of the transferor.
f. Transfer is treated as a transfer by a real estate investment trust for pur- poses of §857 of the Internal Revenue Code.
Required documentation: Copy of agreement governing transfer between transferor and transferee; certified copy of Articles of Incorporation of trans- feror; Certificate of Good Standing of transferor issued by the state in which transferor is incorporated.
g. Transfer is pursuant to a condem- nation and conversion into a similar property for purposes of §1033 of the Internal Revenue Code.
Required documentation: Copy of agreement governing transfer between transferor and government body or authority condemning the property; notarized affidavit executed by trans- feror stating that transferor will identify and purchase replacement property within the time limits required by §1033 of the Internal Revenue Code, or copy of contract of sale if transferor has already identified replacement property. If proceeds from condemnation exceed price of replacement property, the ex- cess must be stated on the application as the taxable amount.
h. Transfer is between spouses or in- cident to divorce for purposes of §1041 of the Internal Revenue Code.
Required documentation: Copy of marriage license or divorce decree; copy of deed which will be recorded to accomplish the transfer; if incident to divorce, copy of section of court order or separation agreement governing transfer of the property.
i. Transfer is treated as a transfer by an S corporation for purposes of §1368 of the Internal Revenue.
Line 7. Other. The transfer is otherwise fully or partially exempt from the recognition of gain in accordance with provided explanation.
Required documentation: Attach any and all documents necessary to show that the transfer is fully or partially exempt from tax. This may include a copy of contract of sale or copy of estimated HUD-1 settlement sheet; copy of HUD-1 settlement sheet from purchase of property, if claiming settlement expenses as part of adjusted basis; and receipts and invoices for any capital improvements you are claiming.
Complete this section if you are requesting a partial exemption. This section must be completed or the application for partial exemption will be denied.
Signature(s)
Form MW506AE must be signed by an individual (both taxpayer and spouse, if filing a joint Maryland income tax return), or a responsible corporate officer.
Please include a daytime telephone number where you can be reached between 8:00 AM and 5:00 PM.
Your signature(s) signifies that your application, including all attachments, is, to the best of your knowledge and belief, true, correct and complete, under the penalties of perjury.
If a power of attorney is necessary, complete federal Form 2848 and attach to your application.
Where to File
Mail the completed form and all attachments to:
Comptroller of Maryland
Revenue Administration Division
Attn: NRS Exemption Requests
P.O. Box 2031
Annapolis, MD 21404-2031
Additional Information
For additional information visit www.marylandtaxes.com, e-mail nrshelp@comp.state.md.us or call
1-800-MDTAXES (1-800-638-2937) or 410-260-7980 in Central Maryland.
When it comes to selling real property and associated personal property in Maryland by nonresident individuals and entities, understanding the process of how to apply for a Certificate of Full or Partial Exemption from the withholding requirements on the proceeds can save a lot of time and headaches. Not every nonresident seller understands the importance of this process, yet completing the Maryland Form MW506AE correctly is crucial. This guide simplifies the process for filling out the form and provides details on the necessary steps to take before mailing it to the Comptroller of Maryland, ensuring that you meet the deadline which is no later than 21 days before the closing date of the sale.
By meticulously following these steps, nonresident sellers can correctly apply for the Certificate of Full or Partial Exemption for their Maryland property sale. This ensures compliance with Maryland tax laws while potentially saving money by qualifying for either full or partial exemption from withholding on the sale proceeds.
The Maryland Form MW506AE, also known as the Application for Certificate of Full or Partial Exemption, is used to apply for an exemption from withholding requirements on the proceeds from the sale of real and associated personal property in Maryland by nonresident individuals and entities. This form allows these parties to request either a full or partial exemption from withholding taxes at the time of property sale. It is important to submit this form to the Comptroller of Maryland no later than 21 days before the property's closing date to ensure timely processing.
This form must be filed by nonresident individuals and entities, including fiduciaries, C corporations, S corporations, limited liability companies, or partnerships when they sell real property and associated personal property in Maryland. Separate forms must be filed for each individual or entity involved in the transfer, except in the case of a husband and wife filing a joint Maryland income tax return. This requirement aims to accurately determine the tax obligations and potential exemptions applicable to the proceeds from the sale of the property.
When filing Form MW506AE, the required documentation varies depending on the reason for requesting an exemption. Commonly required documents include:
It’s critical to provide all necessary documentation to support your exemption claim, which may include additional items based on your specific exemption reason.
The calculation for tax exemption on Form MW506AE depends on the specific exemption being claimed. Generally, the process involves:
Applicants requesting a partial exemption must complete this section of the form or their exemption request might be denied. Careful calculation and documentation are crucial to accurately determine and justify the exemption amount.
Filling out the Maryland Mw506Ae form can be a complex process that requires attention to detail. Unfortunately, it's easy to make mistakes that can delay applications or impact exemption requests. Here are seven common mistakes people make when completing this form:
To ensure the process runs smoothly, it's recommended to double-check all items for accuracy and completion before submission. Proper attention to detail can significantly increase the chances of a successful application.
When dealing with property transactions in Maryland, particularly for nonresident individuals and entities looking to obtain exemption from withholding requirements on the sale's proceeds, the Maryland MW506AE form is pivotal. However, this form is often accompanied by other crucial documents, each serving a specific role in ensuring the transaction complies with state regulations and tax laws.
The process of selling or purchasing property, particularly as a nonresident in Maryland, involves navigating through various documentation and fulfilling state requirements. Each form plays a unique role, from declaring tax obligations to detailing the financial aspects of the transaction. By understanding and correctly using these forms, parties involved can ensure a smoother, compliant transaction, securing their interests and meeting statutory demands.
The Maryland MW506AE form, designed to request a Certificate of Full or Partial Exemption from the withholding requirements on real property and associated personal property sales by nonresident individuals and entities in Maryland, aligns closely with other tax-related documents in both purpose and structure. Specifically, it shares similarities with the Internal Revenue Service (IRS) Form 8288, IRS Form 8822-B, and state-specific forms like the California Form 593. Each document serves to facilitate the tax reporting and payment obligations associated with real estate and other transactions involving nonresident parties.
IRS Form 8288, "U.S. Withholding Tax Return for Dispositions by Foreign Persons of U.S. Real Property Interests," is a federal requirement for transactions involving foreign sellers of U.S. property. Similar to the MW506AE form, Form 8288 is used to report and remit withheld taxes on the sale of real estate to ensure compliance with the Foreign Investment in Real Property Tax Act (FIRPTA). Both forms necessitate detailed information about the transaction, including the seller's identity, the property description, and the sale’s financial aspects. However, while the MW506AE applies specifically to Maryland's nonresident individuals and entities, Form 8288 addresses foreign persons’ disposals of U.S. real property interests on a national scale.
IRS Form 8822-B, "Change of Address or Responsible Party — Business," while not directly related to real estate transactions, is another form nonresident entities might encounter when dealing with property sales. It is necessary for updating the IRS about changes in address or responsible party information for a business entity. The connection to the MW506AE form lies in the critical nature of maintaining up-to-date records with tax authorities to ensure the smooth processing of exemptions and withholdings pertinent to property transactions. Accurate information on both forms helps in avoiding processing delays or issues with the exemption requests.
California Form 593, "Real Estate Withholding Statement," serves a similar purpose to the MW506AE form but is specific to the state of California. It is utilized in the withholding of taxes on the sale or transfer of real property by nonresidents. Both the MW506AE and Form 593 require detailed information about the property sale, including the seller and buyer's particulars, property details, and the sale price. These forms play a crucial role in ensuring that nonresident sellers meet their tax obligations in the respective states, aiding in the regulation of property sales and the collection of applicable taxes.
Filling out the Maryland MW506AE form correctly is essential to ensure a smooth process in applying for a Certificate of Full or Partial Exemption. Here are some do's and don'ts that will help guide you through the process:
There are numerous misconceptions around the Maryland MW506AE form, which is essential for understanding by individuals or entities looking to apply for a certificate of full or partial exemption from the withholding requirements on the proceeds of the sale of real property and associated personal property in Maryland by nonresident individuals and nonresident entities. Below are nine common misconceptions explained:
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