The Maryland MW506AE form is an application used to request a Certificate of Full or Partial Exemption from withholding requirements on the sale of real property and associated personal property in Maryland by nonresident individuals and entities. This form is essential for ensuring compliance with Maryland tax laws and must be submitted to the Comptroller of Maryland at least 21 days prior to the closing date of the sale. For those needing to fill out this form, click the button below to get started.
The Maryland MW506AE form serves a crucial role in the real estate transaction process for nonresident individuals and entities looking to navigate the complexities of tax withholding on property sales. This form is specifically designed to request a Certificate of Full or Partial Exemption from the state's withholding requirements on the proceeds from the sale of real property and associated personal property. To successfully utilize this form, applicants must provide detailed information regarding the transferor or seller, including names, identification numbers, and the nature of their ownership. Additionally, the form requires comprehensive property information, such as the description, sales price, and adjusted basis of the property being sold. It is essential to submit the completed MW506AE form to the Comptroller of Maryland at least 21 days before the closing date to ensure timely processing. Reasons for exemption may include the sale of a principal residence, tax-free exchanges, or transfers of inherited property, among others. Proper documentation must accompany the application to substantiate the claims made, ensuring compliance with Maryland tax regulations.
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 [email protected] or call
1-800-MDTAXES (1-800-638-2937) or 410-260-7980 in Central Maryland.
Filling out the Maryland MW506AE form is a crucial step for nonresident individuals and entities seeking a certificate of full or partial exemption from withholding requirements related to the sale of real property. It’s essential to ensure that all information is accurate and complete to facilitate a smooth process. Here’s a straightforward guide to help you navigate through the form.
After submitting the form, it will be reviewed by the Comptroller of Maryland. You can expect to receive a decision regarding your exemption request. Make sure to follow up if you do not receive confirmation within the specified timeframe.
The Maryland MW506AE form is used to apply for a Certificate of Full or Partial Exemption from the withholding requirements on the sale of real property by nonresident individuals and entities. This means that if you are selling property in Maryland and meet certain criteria, you can request to be exempt from having taxes withheld from the proceeds of that sale.
Individuals, fiduciaries, corporations, limited liability companies, and partnerships can file the MW506AE form. If you are a married couple filing jointly, you will need to submit a separate form for each seller unless both names are included on the same form.
The completed MW506AE form must be received by the Comptroller of Maryland at least 21 days before the closing date of the property sale. This ensures that there is enough time for the Comptroller to process your application and issue the necessary certificate.
You will need to provide several details, including:
There are several reasons you might request an exemption, including:
Be sure to check the appropriate box on the form and provide any required documentation.
The Comptroller's decision to issue or deny a Certificate of Exemption is final and not subject to appeal. If your application is denied, you will be required to comply with the withholding requirements on the sale proceeds.
You should mail your completed form and any attachments to:
For additional information, you can visit the Maryland State Taxes website, email [email protected], or call 1-800-MDTAXES (1-800-638-2937) or 410-260-7980 if you are in Central Maryland.
Missing Deadlines: Many people fail to submit the MW506AE form at least 21 days before the closing date. This can lead to automatic denial of the exemption request.
Incorrect Entity Type: Selecting the wrong entity type for the transferor/seller can cause confusion. Ensure that the correct box is checked, whether it’s an individual, corporation, or partnership.
Incomplete Property Description: Not providing a full description of the property, including the street address and property account ID, is a common oversight. This information is essential for processing the application.
Omitting Documentation: Failing to attach required documentation for the reason of exemption can lead to rejection. Always check the specific requirements for the exemption you are claiming.
Calculation Errors: Mistakes in calculating the tax to be withheld can result in delays. Ensure that the adjusted basis and contract sales price are accurately calculated and clearly stated.
Unsigned Forms: Submitting the form without the necessary signatures can invalidate the application. Make sure all required parties sign and date the form before submission.
The Maryland MW506AE form is essential for requesting a Certificate of Full or Partial Exemption from withholding requirements for nonresident sellers of real property. Alongside this form, several other documents may be required to ensure a smooth transaction. Below is a list of commonly used forms and documents that complement the MW506AE.
Each of these documents plays a vital role in the process of applying for a Certificate of Exemption. They help clarify the circumstances of the sale and ensure compliance with Maryland tax regulations. Proper preparation and submission of these forms can significantly streamline the transaction process.
The Maryland MW506AE form is similar to the IRS Form 8288, which is used for withholding tax on dispositions of U.S. real property interests by foreign persons. Both forms serve the purpose of ensuring that appropriate taxes are withheld from the proceeds of real estate transactions. While the MW506AE specifically addresses exemptions for nonresident sellers in Maryland, Form 8288 focuses on the federal requirements for foreign sellers. Each form requires detailed information about the property and the parties involved, ensuring compliance with tax regulations.
Another comparable document is the IRS Form 8821, which authorizes an individual or organization to receive confidential tax information from the IRS. Like the MW506AE, it involves tax compliance but focuses more on the authorization aspect rather than exemption from withholding. Both forms require signatures and identification numbers, emphasizing the importance of accurate information for tax-related processes. The MW506AE is specific to Maryland real estate transactions, while Form 8821 is applicable at the federal level for various tax matters.
The Maryland Form MW506AE also resembles the IRS Form 1040, which is the standard individual income tax return. Both forms require taxpayers to report specific information about their income and deductions. The MW506AE, however, is focused solely on real estate transactions involving nonresidents, while Form 1040 covers a broader range of income sources. Each form serves to ensure that the appropriate taxes are calculated and reported, highlighting the importance of accurate documentation in tax compliance.
Additionally, the Maryland Form 502 is another relevant document. This form is used by residents to file their Maryland income tax returns. While the MW506AE is aimed at nonresidents seeking exemptions from withholding, Form 502 is for residents to report their total income and calculate their tax liability. Both forms require detailed personal and financial information, but they cater to different taxpayer classifications within the state.
The IRS Form 706 is also similar in that it deals with tax implications related to property, specifically estate taxes. Both the MW506AE and Form 706 require detailed information about property ownership and valuation. However, while the MW506AE is concerned with withholding on real property sales, Form 706 is focused on estate tax obligations after a person's death. Both forms are essential for ensuring compliance with tax laws, albeit in different contexts.
Furthermore, the Maryland Form 1 is akin to the MW506AE as it pertains to the state’s income tax for individuals. Both forms require detailed information about income and property transactions. However, the MW506AE specifically targets nonresident sellers of real estate, while Form 1 is for Maryland residents. Each form plays a crucial role in the state's tax collection efforts, ensuring that taxpayers meet their obligations.
The IRS Form 1099-S is also relevant, as it reports the sale or exchange of real estate. Similar to the MW506AE, it is used in real estate transactions to report proceeds to the IRS. Both forms require information about the property and the parties involved. However, the MW506AE focuses on exemptions from withholding, while Form 1099-S is primarily for reporting purposes, ensuring that all parties comply with tax regulations.
Another document to consider is the Maryland Form 502CR, which is a credit form for Maryland residents. While the MW506AE is focused on nonresidents seeking an exemption from withholding, the 502CR allows residents to claim various tax credits. Both forms require detailed information about the taxpayer’s financial situation, but they serve different purposes in the context of tax compliance.
Lastly, the IRS Form 4506-T is relevant as it allows taxpayers to request a transcript of their tax return. Similar to the MW506AE, it involves the exchange of information with tax authorities. However, the MW506AE is specifically for exemption requests related to real estate transactions, while Form 4506-T is used for obtaining copies of tax documents for various purposes. Both forms underscore the importance of maintaining accurate records for tax-related matters.
When filling out the Maryland MW506AE form, it is essential to follow specific guidelines to ensure the application is processed smoothly. Here are eight important do's and don'ts:
The Maryland MW506AE form serves a specific purpose in the realm of real estate transactions involving nonresidents. However, several misconceptions surround its use and requirements. Here are ten common misunderstandings about the MW506AE form:
Understanding these misconceptions can aid sellers in navigating the complexities of real estate transactions in Maryland, ensuring compliance and potentially avoiding unnecessary tax liabilities.
Key Takeaways for Using the Maryland MW506AE Form