PLEASE! I REALLY need help from Canadians who sold their USA timeshare!

[booklvr]

We're in the process of selling our Marriott Newport Coast Villas timeshare. We purchased it as a resale 3 years ago for $4,500. We're selling it now for $4000, at a slight loss of $500.

I'm so confused and surprised by the the withholding tax. I had no idea about this until we got the papers from the closing agent. We sold another timeshare in the past, but only for $100. We didn't get anything about withholding taxes or TINs or US tax returns. They're requiring a 15% holding tax plus asking us for our TIN.... we don't have TINs. I never heard of it before now.

Did you pay a withholding tax when you sold your timeshare? Is there a way to get this refunded or get an exemption?

I will call a lawyer tomorrow but it would be better to get input also from a TUG member who has gone through this.

PLEASE help. We need you!

 

[WalnutBaron]

We sold a timeshare at a loss a few years ago and were not subject to a witholding tax. Here is a good article from The Wall Street Journal which should give you some guidance.

 

[WackyLucy]

We sold a timeshare at a loss a few years ago and were not subject to a witholding tax. Here is a good article from The Wall Street Journal which should give you some guidance.

I would respectfully note that the inquiring OP is apparently in Canada and selling a U.S. timeshare.
Accordingly, FIRPTA requirements and (10%) tax withholding, referenced briefly toward the end of the article you have cited, may very well apply.

 

[booklvr]

Yes, I'm Canadian. I'm wondering about the process and what to do first.

 

[samara64]

As long as you are not a US citizen or permanent resident (Green Card), they will hold 10% or more from sale. You will have to file an IRS form 1040NR to get your money back as long as you did not make any profit. Else you will pay income tax.

You may want to read this link:

https://www.irs.gov/publications/p519/ch04.html

or publication IRS 544

 

[schiff1997]

You didn't say if your buyers are US or Canadian ?

 

[booklvr]

Buyers are from USA.

 

[samara64]

Did you sell through Marriott resales. They hire first American in CA to do the transfer. FA, or any other closing company for that matter, has to abide by all IRS rules. I am positive you will get the refund back from IRS once you file for it.

Broker will report the gross/full selling price. You have to state the net selling price after commission and other fees and then deduct your original buying price. If negative or 0, you should get a refund.

 

[bizaro86]

You can apply to the IRS in advance for an exemption to the FIRPTA withholding requirements. You will have to demonstrate to them that no gain was made on the sale. Then you can present the withholding certificate they'll issue you to your closing company. If your sale has already closed it is too late to do this, and you'll have to file for a refund.

See here: https://altrolevy.com/blog-cross-bo...thholding-tax-requirements-for-non-residents/

and here: https://www.irs.gov/individuals/international-taxpayers/firpta-withholding

 

[booklvr]

Did you sell through Marriott resales. They hire first American in CA to do the transfer. FA, or any other closing company for that matter, has to abide by all IRS rules. I am positive you will get the refund back from IRS once you file for it.

Broker will report the gross/full selling price. You have to state the net selling price after commission and other fees and then deduct your original buying price. If negative or 0, you should get a refund.

Wherr do I get that form? I sold through a post on Redweek and using First American for closing. Should they be providing more info or something? It's not easy trying to figure out the IRS website.

 

[samara64]

search 1040NR form and instructions. I think you do not need to wait til years end to file.

I am sure FA will have a support person that will explain that as I am sure they do it daily. Just call them.

Here is a good link as well:

https://www.irs.gov/businesses/withholding-of-tax-on-dispositions-of-u-s-real-property-interests

 

[booklvr]

Good links. So is the sale considered closed now since the paperwork is done? We haven't signed yet because we have to go to the US embassy to do that with their notary.

 

[samara64]

Actually you have to wait till it closes and they issue you a 1099. Then you can file with it.

 

[bizaro86]

Good links. So is the sale considered closed now since the paperwork is done? We haven't signed yet because we have to go to the US embassy to do that with their notary.

If the paperwork is done I doubt the other parties will want to wait for you to get a withholding certificate.

Probably betterm to just let them take the withholding and then file to get it back.

 

[theo]

You didn't say if your buyers are US or Canadian ?

That detail doesn't actually matter at all. Seller is not a U.S. citizen and is selling real estate owned in the U.S.. Seller is therefore subject to the 10% withholding --- regardless of the residency of the buyer. As noted already, seller can (if not selling at a net profit) recover those withheld funds later by completing and filing the appropriate forms (see post #9 above in this thread) with IRS. This tax detail should not delay or impact closing on the transaction --- which appears to have occurred already anyhow, if I read correctly. Filing for "exemption" is clearly no longer an available option if the closing is already completed.

 

[bizaro86]

That detail doesn't actually matter at all. Seller is not a U.S. citizen and is selling real estate owned in the U.S.. Seller is therefore subject to the 10% withholding --- regardless of the residency of the buyer. As noted already, seller can (if not selling at a net profit) recover those withheld funds later by completing and filing the appropriate forms (identified in post #11 in this thread) with IRS. This tax detail should not delay (or in any other way impact) closing on the transaction.

As a Canadian, I would always file for the exemption if I qualified for it, as making an interest free loan to the US treasury doesn't appeal to me. It's probably too late for the OP to do that, but worth mentioning for reference.

 

[samara64]

Sorry, I just see that you are asking Canadians for info. I just jumped in. I am in the US.

 

[booklvr]

Well after lots of research I think I finally understand... at least basically... what is required. Wow, American tax papers and even the IRS website is SOOOO hard to read. They need a layman's booklet. lol

So we are just going ahead with everything and then I'll file to try and get the tax back. Thanks for all your help. I really had no idea about any of this. I didn't realize there would be tax implications in the USA. I thought there could be here in Canada... anyway, it's all good.

I really appreciate the replies to this post!