10% sales tax on timeshare

I am in the midst of selling my timeshare in Orlando. The closing company is telling me there is a 10% us withholding tax for no US residents. Since I am Canadian they say it applies to us unless we have a US social security number. Can anyone confirm or tell me about this .

This is true. However, if you have lost money on it you can file a form to get it back. Not sure what it's called. Could be a 1099. The first time I did it, I filled out the form and got the money back from the lawyer in about 2-3 months. The 2nd time, I had to get a tax number from the IRS and had to file a US tax return. It was quite an ordeal but I did get the money back eventually.

Where is the forms web site

Thanx Lenora. Can you tell me where you found the forms, is there a website for IRS where they post thiese forms.

Based on the facts as you presented, yes, you will be subject to the tax withholding. See this thread for some more info.

IRS forms and instructions (Form 1040-NR) for the refund are located here, although the 2006 forms will likely not be posted there until near the end of 2006. To get a head start, look at the "Simplified Procedure for Claiming Refunds" on page 3 of the 2005 instructions for Form 1040-NR (located in the drop-down box).

I bought a week from a Canadian last year.

As I recall, both we and the seller had to complete some affidavits to the effect that what was being sold was a "residence" and that we as buyers were actually going to "live" in it at least 50% of the time in the first two years.

The Canadian seller had to do sign the affidavit in the presence of a US notary.

My understanding was that one of the reasons for doing this was to eliminate the 10% withholding. It better have for all the effort it took us and the seller.

We used Quality Timeshare, and they seemed to have a pretty good grasp of the details and what was required.

Art

Is this a Florida issue or is it Federal? If it's Florida are there other states that impose the same withholding tax?

Could be both state and federal. I know Hawaii has a withholding requirement, unless you fill out forms showing there was no profit on the sale. I don't recommend signing what sounds like a false affidavit, as recommended above, as the consequences of this could be more expensive than having to file for a refund.

It's a U.S. issue, covered by §1445 of the Internal Revenue Code.

Art -

Unfortunately, the IRS interpretation of the exception you relied upon appears to be that the new owner must use the real property as a "home", under the common use of that term. Although it's unlikely that the IRS would press the issue with you, there is some possibility that the IRS could come after you for that withholding tax.

Further, that exception, even if it does apply, would require the purchaser to occupy the timeshare for each of the first two years. If the current year’s week has already been banked or if the seller is keeping this year's use that wouldn't be possible. Also, the unforeseen circumstances rule would apparently not allow the purchaser to change his/her mind and exchange or rent instead of occupying the week in most circumstances.

Thus, I would advise others to follow the intent of the law rather than trying to follow a very narrow and possibly faulty interpretation to try avoiding the withholding. Note that the purchaser is the person with the potential liability for the withholding tax!