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13. How do I complete Form REW-1-1040, Form REW-1-1041 or Form REW-1-1120 if there are multiple sellers or the seller is an LLC or partnership?

Wed, 31 Jul 2013 14:53:22 EDT

When property is sold by more than one nonresident seller, you must complete a separate form for each nonresident seller receiving proceeds from the sale. For example, if the Maine property is owned by more than one individual, a separate Form REW-1-1040 must be completed for each nonresident individual receiving proceeds from the sale. If the seller is an LLC or partnership, complete a separate Form REW-1-1040, Form REW-1-1041 or Form REW-1-1120 for each nonresident partner receiving proceeds from the disposition. Be sure to complete the appropriate form for each seller. Use REW-1-1040 for individuals and sole proprietors, REW-1-1041 for trusts and estates and REW-1-1120 for corporations.

Rev. 1/10/13



12. How does a partnership operating in Maine determine if it is subject to Maine real estate withholding?

Thu, 10 Jan 2013 09:27:36 EST

A resident partnership, of which at least 75% of the ownership interest is held by Maine residents, is not subject to the requirement. Limited liability companies ("LLCs") are considered partnerships unless otherwise classified for federal income tax purposes.

Rev. 1/10/13



11. What if there is more than one owner of the Maine property being sold?

Thu, 10 Jan 2013 09:27:07 EST

If the total purchase price for the property exceeds $50,000, the closing agent will withhold 2.5% from each nonresident seller's share of the total sales price. The amount withheld is remitted to Maine and the proper amount will be credited to each nonresident's Maine income tax account.

Rev. 1/10/13



10. Is the Maine real estate withholding amount considered the final Maine income tax due on the sale of my Maine property?

Thu, 10 Jan 2013 09:26:37 EST

No. The Maine real estate withholding amount is merely an estimate of the income tax due on the gain from the sale of the Maine property. A Maine income tax return must be filed to determine the actual tax due on the gain and whether or not a refund is due to you. In some cases, an additional amount may be due with the Maine income tax return filed.

Rev. 1/10/13



9. Am I subject to Maine real estate withholding if I placed my Maine home on the market as a Maine resident but don't sell the property until after I have become a nonresident?

Thu, 10 Jan 2013 09:31:12 EST

Yes. If you are a nonresident at the time of the property closing, you are subject to the Maine real estate withholding requirement. If you believe that any portion of the gain is exempt from Maine taxation, see questions 2 and 3.

Rev. 1/10/13



8. Are nonresident individuals selling property in Maine the only individuals subject to the real estate withholding requirement?

Thu, 10 Jan 2013 09:29:34 EST

Yes. Although Maine resident individuals are also subject to Maine income tax on gains realized from the sale of real estate, only nonresident individuals are subject to the Maine real estate withholding requirement. Non-Maine businesses and nonresident estates and trusts selling Maine real property are also subject to the Maine real estate withholding requirement.

Rev. 1/10/13



7. Am I subject to the Maine real estate withholding requirement if the sale of the Maine real property is considered a Section 1031 like-kind exchange?

Thu, 10 Jan 2013 09:29:30 EST

The 2.5% withholding from total sale price is required, even in a like-kind exchange. Maine Revenue Services follows the federal guidelines on the treatment of IRC Section 1031 like-kind exchanges. Therefore, if no gain is recognized for federal income tax purposes (due to the qualifying like-kind exchange transaction), no gain is recognized for Maine income tax purposes. As such, the seller may request an exemption from the Maine real estate withholding requirement for this property transfer. A copy of the Section 1031 like-kind exchange contract must accompany the request for exemption form prior to the closing.

Rev. 1/10/13



6. What is the Maine real estate withholding based on if the property is sold on an installment sale basis?

Thu, 10 Jan 2013 09:29:26 EST

The required withholding amount is still 2.5% of the total sales price. However, the seller may request that a lower amount be withheld. Following the federal guidelines for an installment sale, the seller reports the amount of gain to be realized in the year of the sale. The Maine real estate withholding amount may be based on this first year gain. The taxpayer is then responsible for making estimated tax payments and filing a Maine income tax return yearly until the installment contract is complete.

Rev. 1/10/13



5. When is the withholding or the request for exemption or reduction due?

Thu, 10 Jan 2013 09:29:22 EST

Withholding must be submitted to MRS within 30 days of property transfer. A request for exemption or reduction must be completed and submitted at least five business days prior to the closing date. The real estate withholding is retained by the closing agent at the time of the property transfer and remitted to MRS with Form REW-1-1040, Form REW-1-1041 or Form REW-1-1120. Once the payment is submitted to MRS, no refunds will be made until the related income tax return is filed for the year of sale. For more information, go to http://www.maine.gov/revenue/incomeestate/rew/ .

Rev. 1/10/13



4. How do I request an exemption or a reduction of the withholding?

Thu, 10 Jan 2013 09:32:44 EST

Form REW-5 must be completed to request an exemption or a reduction in the real estate withholding amount. Exemptions are generally granted when there is a loss on the sale of the property, a federal exclusion of the gain on the sale of a principal residence, the transaction involves a like-kind exchange, or for other situations resulting in no Maine income tax liability. In addition, reductions in the real estate withholding amount may be authorized for the situations stated in question 3.

Rev. 1/10/13



3. Can the Maine real estate withholding amount be reduced?

Mon, 23 Dec 2013 13:15:06 EST

Yes. The seller or the buyer may submit a request to the State Tax Assessor to reduce the withholding. If the seller is a nonresident individual or trust and 7.95% of the realized gain is less than 2.5% of the sales price, that lower amount may be allowed. If the seller is a nonresident corporation and 8.93% of the realized gain is less than 2.5% of the sales price, that lower amount may be allowed. Installment sales may also result in a reduced withholding amount (see question 6). If there will be no gain, the seller may apply for an exemption from withholding (see question 4).

Rev. 12/23/13



2. Are there any exceptions to the Maine real estate withholding requirement?

Thu, 10 Jan 2013 09:33:49 EST

Yes. If the seller is a resident of Maine at the time of the sale, if the consideration is less than $50,000 (see note below) or if the capital gain is not recognized for federal or Maine income tax purposes, withholding is not required. See 36 M.R.S.A. § 5250-A(3) for these and other exemptions that may apply. See question 4 for requesting an exemption from the Maine real estate withholding requirement.

If property is subject to a foreclosure sale and the consideration received for the property does not exceed the debt secured by that property, no Maine income tax withholding is required and Maine Revenue Services does not require a withholding exemption certificate (see 36 M.R.S.A. § 5250-A(3-A)).

Note: Federally taxable gains on the sale of Maine real property are taxable by Maine, even if the total consideration is less than $50,000.

Rev. 1/10/13



1. What is Maine real estate withholding?

Wed, 31 Jul 2013 14:50:55 EDT

Maine Law requires, at the time of closing, a buyer to withhold 2.5% of the consideration price ($50,000 or more) from any nonresident individual, estate or business. This 2.5% withholding is an estimated tax payment to ensure that a seller complies with Maine income tax responsibilities. The withholding, along with a completed Form REW-1, must be sent to MRS within 30 days of the date of closing. A seller may qualify for a reduction in or exemption from the real estate withholding requirement. For more information, go to http://www.maine.gov/revenue/incomeestate/rew/ .

Rev. 1/10/13