Maryland Form Mw506Ae – Fill Out and Use This PDF

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

Transferor/Seller’s Name

Your Social Security Number/FEIN

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.

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.

Transferor/Seller’s Information

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.

Property Information

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.

Transferee/Buyer’s Information

Enter the name and address.

Check the box indicating the transferee/buyer’s entity type.

Attach schedule if there are multiple transferees/buyers.

Reason for Full or Partial Exemption from Withholding

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.

Calculation of Tax to be Withheld

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.