Discussion:Hawaii Form N-289

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Discussion Forum Index --> Basic Tax Questions --> Hawaii Form N-289

Discussion Forum Index --> Tax Questions --> Hawaii Form N-289

Rosalydia (talk|edits) said:

1 October 2007
I am a CPA in Maryland. My California client will sell their Hawaii rental property condo at a loss.

It would be very nice if this client did not have to have HI withholding on the sale. Is the anticipation of a capital loss a "reason of a nonrecognition of the IRC as operative under chapter 235, HRS"? Thank you for your answer.

Bengoshi (talk|edits) said:

2 October 2007
I didn't do much research on this, but I believe the form you'd use in your client's situation is Form N-288B (not N-289). N-288B can only be used if client has not yet sold the condo. Client will have to apply for an "exemption" from the non-resident 5% withholding requirement on the N-288B, and only if the State of Hawaii grants the exemption will the buyer be released of their withholding duty.


N-289 would be used (for example), if your client was eligible for the IRC 121 exclusion upon the sale of his/her principal residence -- which I gather is not the case for your client. Having a capital loss unfortunately is not a "nonrecognition" provision of the IRC.

The applicable rules are found at: http://www.capitol.hawaii.gov/hrscurrent/Vol04_Ch0201-0257/HRS0235/HRS_0235-0068.HTM

Hope this helps.

Rosalydia (talk|edits) said:

2 October 2007
Thank you for so much for your help, Bengoshi.

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