Sale of RI timeshare - tax question

[joyzilli]

We sold our timeshare in Newport, RI last year. Today we received in the mail a RI Non-resident tax booklet. The closing was done through an attorney in RI and at the time, we, the sellers, had to fill out a form electing to have withholding based on gain. The withholding amount due was minimal, but now I have a few questions.

When this Certificate of Withholding was presented at the closing, was the amount due paid at that time? I went through my paperwork and this amount wasn't deducted from our proceeds, so I'm not sure if it was paid or not. I'm not sure if we now have to file a non-resident RI tax form. I've read and re-read the form and am still confused.

Has anyone sold a RI timeshare and is familiar with this?

 

[Dave M]

I assume you received the 2008 RI-1040NR booklet. I will also assume you had a loss on the sale.

The pertinent language is in the first paragraph of "Who Must File a Return" on the first page of the General Instructions for nonresidents:

Every nonresident individual required by the laws of the United States to file a federal income tax return who has income derived from or connected with Rhode Island sources must file a Rhode Island individual income tax return. Nonresidents should complete page 7, schedule III.

The question you might ask is, What constitutes "income"? Well, as instructed, you should go to Schedule III on page 7 of the form. What that schedule does is to apportion your adjusted gross income from your Federal return to Rhode Island. Thus, if you had a loss on your sale, you have no income or loss on the transaction to report on your Federal return and, thus, none on a Rhode Island return. Accordingly, unless you had a gain on the sale, I would not file a return.

If you eventually get a letter from Rhode Island asking why you didn't file a 2008 return, simply respond with a calculation showing the cost, selling price and loss on this sale and specify that it is the only transaction that connects you to Rhode Island.

Incidentally, since this transaction was obviously reported to the IRS as well as Rhode Island, you should show the selling price on Schedule D of your Federal return, offset it with the same amount as cost (even though your cost is higher) and show no gain or loss. You can send a copy of that Schedule D along with your response to Rhode Island if you get a letter from them.

 

[joyzilli]

Thanks Dave----

Actually we did have a gain of $699, so that changes things a bit. Can the closing costs I paid to purchase the unit be deducted from the $699. If so, then my gain would be $300.

I assume I now need to file the RI non resident taxes - but I'm still not quite sure where the withholding amount of $40.14 comes in to play. After reading the paperwork, it sounds as though it's already been paid at the closing (although I'm not sure how, because we didn't pay it), and it goes on to say that if after filing the taxes that we over estimated, then they would owe us the difference.

I also plan to call the attorney in RI on Monday to hear more about the withholding money.

Joyce

 

[Dave M]

Yes, the closing costs can be taken into account, as well as any closing costs (adding to your purchase price) that you paid when you bought the timeshare. Also, if you still have the budgets and/or MF bills for the years you owned the timeshare, you can find all amounts you paid for the reserves (not the operating fee portion of the fee) and add those to your cost.

You should insert the withholding of $40.14 on line 18C on the first page of the tax form.

Also, take a look at the "Selling..." section of the TUG Income Taxes and Timeshares article for anything else that might be pertinent.

 

[joyzilli]

Thanks Dave!!

 

[joyzilli]

One more question:

I didn't see anything mentioned re: the fees involved in listing the timeshare for sale. If I have receipts for the Ads where I listed it for sale, can I deduct this amount also?

 

[Dave M]

Yes, it's a selling expense, just like the closing costs.

I can tell that gain is rapidly declining!

 

[Wonka]

RI RE Transfer Tax

In addition, make sure you look at both of your settlement statements carefully, RI has a RE transfer tax of .4%, usually paid by the seller. This would also be selling cost to the seller, or an addition to basis if paid by the buyer.

 

[gorevs9]

Congrats on your resale (and profit).

And thanks for your small tax contribution to close our $350 million deficit .