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Dos and Don'ts

When filling out the Maryland MW506AE form, there are important guidelines to follow. Here’s a list of things you should and shouldn’t do:

  • Do ensure that the completed form is submitted at least 21 days before the closing date to avoid delays.
  • Do provide accurate and complete information, including names, addresses, and identification numbers.
  • Do attach all necessary documentation that supports your claim for exemption from withholding.
  • Do sign the form, as your signature certifies the truthfulness of the information provided.
  • Don’t write or staple anything in the designated space on the form.
  • Don’t submit multiple forms for a single transaction unless the transferors/sellers are filing separately.
  • Don’t leave any required fields blank; incomplete forms may be rejected.
  • Don’t forget to check the appropriate boxes for entity types and reasons for exemption.

Misconceptions

Understanding the Maryland MW506AE form is crucial for nonresident individuals and entities involved in real estate transactions. However, several misconceptions can lead to confusion and potential issues. Here are ten common misconceptions about the form:

  • The MW506AE is only for residents of Maryland. This form is specifically designed for nonresident individuals and entities selling property in Maryland.
  • All sellers must submit the MW506AE. Only nonresident sellers are required to use this form. Residents do not need to submit it.
  • Submission of the form guarantees exemption from withholding. Completing the MW506AE does not guarantee an exemption; it merely requests one based on specific criteria.
  • The form can be submitted at any time before closing. The MW506AE must be received by the Comptroller no later than 21 days before the closing date.
  • Only individuals can apply using the MW506AE. Various entities, including corporations and partnerships, can also file this form.
  • Documentation is not necessary when submitting the form. Supporting documentation must be attached to substantiate the exemption claim.
  • There is no penalty for late submission. Late submissions can result in denial of the exemption request, leading to withholding at closing.
  • All types of property sales qualify for exemption. Only specific types of transactions, such as principal residences or tax-free exchanges, qualify for exemption.
  • Once submitted, the exemption cannot be revoked. The Comptroller’s decision is final, but if circumstances change, the seller may need to address those changes.
  • The MW506AE form is the only requirement for nonresidents. Other tax obligations may still exist, and sellers should consult tax professionals to ensure compliance.

Addressing these misconceptions can help ensure a smoother transaction process and compliance with Maryland tax regulations.

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Key takeaways

Filling out and using the Maryland MW506AE form requires careful attention to detail. Here are some key takeaways to keep in mind:

  • Purpose of the Form: The MW506AE form is specifically designed for nonresident individuals and entities to request a Certificate of Full or Partial Exemption from withholding requirements on the sale of real property in Maryland.
  • Timely Submission: To ensure the Comptroller processes the application, it must be received no later than 21 days before the closing date of the sale.
  • Accurate Information: It is crucial to provide complete and accurate information about the transferor/seller and the property being sold, including identification numbers and property descriptions.
  • Documentation Requirements: Depending on the reason for requesting an exemption, specific documentation must be attached. This may include contracts, settlement sheets, or other relevant paperwork.
  • Signature Requirement: The form must be signed by the transferor/seller or a responsible corporate officer, affirming that all information provided is true and complete under penalties of perjury.

These points highlight the essential aspects of the MW506AE form, helping ensure compliance and a smoother transaction process.

Guidelines on Utilizing Maryland Mw506Ae

Completing the Maryland MW506AE form is an important step for nonresident individuals and entities seeking a certificate of exemption from withholding requirements. This form must be submitted to the Comptroller of Maryland at least 21 days before the closing date of the sale. Below are the steps to guide you through filling out the form accurately.

  1. Begin by entering the tax year for the transferor/seller, if it differs from the calendar year.
  2. Fill in the transferor/seller’s information, including name, address, and Social Security or Federal Employer Identification Number (FEIN).
  3. Indicate the entity type of the transferor/seller and the ownership percentage of the property.
  4. Provide a description of the property, including the street address and property account ID number, if known.
  5. Enter the date of closing for the sale or transfer of the property.
  6. Record the contract sales price of the property being sold or transferred.
  7. Check the box that describes how the transferor/seller acquired the property.
  8. Indicate how the property was used at the time of sale and the length of time it was used for that purpose.
  9. Complete the transferor/seller’s adjusted basis section by entering the purchase price, adding capital improvements, and subtracting depreciation.
  10. Fill in the transferee/buyer’s information, including name, address, and entity type.
  11. Check the box indicating the reason for requesting a full or partial exemption from withholding.
  12. Calculate the amount of tax to be withheld at closing by completing the required calculations based on the sales price and adjusted basis.
  13. Sign the form, ensuring that the signature is from the transferor/seller or an authorized representative.
  14. Include a daytime phone number where you can be reached.
  15. Mail the completed form and any required documentation to the Comptroller of Maryland at the address provided.

Form Preview Example

2011

MARYLAND

FORM

MW506AE

Application for Certificate of

Full or Partial Exemption

For Calendar Year 2011 or other tax year

Beginning ________________ , 2011 and Ending ________________

DO NOT WRITE OR STAPLE IN THIS SPACE

NOTE: This form is to be used only to request a Certificate of Full or Partial Exemption from the withholding requirements on the proceeds of the sale of real property and associated personal property in Maryland by nonresident individuals and nonresident entities. This form must be RECEIVED by the Comptroller of Maryland, Revenue Administration Division, NRS Exemption Requests, P.O. Box 2031, Annapolis, MD 21404-2031 no later than 21 days before the closing date.

Transferor/Seller’s Information

Name (If joint, give first names and initials of both)

 

Last Name

 

 

 

 

Your Social Security Number

 

 

 

 

 

 

 

 

 

Name (Corporation, Partnership, Trust, Estate, etc.)

 

 

 

 

 

 

 

Spouse’s Social Security Number

 

 

 

 

 

 

 

 

 

 

T/A or C/O or Fiduciary

 

 

 

 

 

 

 

 

Federal Employer I.D. Number

 

 

 

 

 

 

 

 

 

Current Address (Number and street)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

City, State and Zip Code (province, postal code and country)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Transferor/Seller’s Entity Type

 

 

 

 

 

 

 

 

Ownership Percentage

Individual

S Corporation

 

 

Business Trust

 

 

Estate

Partnership

 

 

Other:

 

 

Trust

Limited Liability Company

______________________________________

 

_____________________________ %

C Corporation

Limited Liability Partnership

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Property Information

 

 

 

 

 

 

 

Description of Property (Include street address, county, or district, subdistrict and lot numbers if no address

 

Date of Closing

is available)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Contract Sales Price

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Property Account ID Number (if known)

 

 

 

 

 

 

 

 

Transferor/Seller Acquired Property By

 

 

 

 

Transferor/Seller’s Adjusted Basis:

Purchase

1031 Exchange

 

 

 

 

 

Purchase price/Inherited value $ ______________________________

Gift

Foreclosure/Repossession

 

 

 

 

 

 

(see instructions)

 

 

Inheritance

Other: _____________________________

 

 

Add: capital improvements

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

and settlement costs

______________________________

Use of Property at Time of Sale:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rental/Commercial

Vacant land

 

 

 

 

 

Less: depreciation (if any)

______________________________

 

 

 

 

 

 

 

Secondary/Vacation

Other: _____________________________

 

 

Adjusted basis:

$ ______________________________

Length of time used for this purpose: Years ___________ Months ________

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Transferee/Buyer’s Information

 

 

 

 

 

 

 

 

 

 

 

Name (If joint, give first names and initials of both)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Name (Corporation, Partnership, Trust, Estate, etc.)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Address (Number and street)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

City, State and Zip Code (province, postal code, and country)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Transferee/Buyer’s Entity Type

 

 

 

 

 

 

 

 

 

Individual

C Corporation

 

 

 

Limited Liability Company

Business Trust

Estate

S Corporation

 

 

 

Limited Liability Parntership

Other:

Trust

Partnership

 

 

 

_____________________________________

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

COM/RAD-306 (Rev. 12/10)

MARYLAND FORM

Application for Certificate of Full or Partial Exemption

2011

MW506AE

Page 2

Transferor/Seller’s Name

Your Social Security Number/FEIN

Reason for Full or Partial Exemption from Withholding

(Attach documentation and calculation)

1.☐ Transfer is of a principal residence as defined in IRC §121.

2.☐ Transfer is a tax-free exchange for purposes of IRC §1031 and is treated as:

☐simultaneous without boot,

☐simultaneous with boot, or

☐delayed, with funds in escrow for acquiring replacement property.

3.☐ Transfer is pursuant to an installment sale under IRC §453 and the transferor/seller will receive less than the full purchase price during the taxable year.

4.☐ Transfer of inherited property is occurring within 6 months of date of death.

5.☐ Transferor/Seller is receiving zero proceeds from this transaction.

6.☐ Transfer is pursuant to a transaction under a specific section of the Internal Revenue Code or other code. Place code letter for your transaction in the box below. (See instructions for detailed descriptions):

☐

7. ☐ Other. Provide a brief explanation in the space provided:

Calculation of Tax to be Withheld

1.

Enter the amount subject to tax witholding. Subtract adjusted basis from contract sales price

2.

Enter tax rate, whichever applies.

 

 

a. If you are a business entity, enter 8.25%

........................................................... .......................................

 

 

 

b. If you are an individual, enter 6.75%

...........................................................

 

 

3.

Amount of tax to be withheld at closing. Line 1 multiplied by line 2. (This line MUST be completed.)

1

2

3

Please

Sign

Here

Under the penalties of perjury, I declare that I have examined this application, including any schedules or statements attached, and to the best of my knowledge and belief, it is true, correct and complete. If prepared by a person other than taxpayer, the declaration is based on all information of which the preparer has any knowledge.

_____________________________________________

___________________________

___________________________

Signature

Applicant’s phone number

Date

_____________________________________________

___________________________

___________________________

Signature

Applicant’s phone number

Date

_____________________________________________

___________________________

___________________________

Signature

Applicant’s phone number

Date

(Rev. 12/10)

MARYLAND FORM

INSTRUCTIONS FOR APPLICATION FOR

2011

MW506AE

CERTIFICATE OF FULL OR PARTIAL EXEMPTION

 

 

The Comptroller’s decision to issue or deny a certificate and the amount of tax is final and not subject to appeal.

GENERAL INSTRUCTIONS

Purpose of Form

Use Form MW506AE to apply for a Certificate of Full or Partial Exemption from the withholding requirements on the proceeds of the sale of real property and associated personal property in Maryland by nonresident individuals and nonresident entities. A nonresident entity is defined to mean an entity that: (1) is not formed under the laws of Maryland; and (2) is not qualified by or registered with the Department of Assessments and Taxation to do business in Maryland.

Who May File an Application

An individual, fiduciary, C corporation, S corporation, limited liability company, or partnership transferor/seller may file Form MW506AE. Unless the transferors/ sellers are a husband and wife filing a joint Maryland income tax return, a separate Form MW506AE is required for each transferor/seller.

IMPORTANT: The completed Form MW506AE must be received by the Comptroller of Maryland no later than 21 days before the closing date of the sale or transfer to ensure timely receipt of a Certificate of Full or Partial Exemption.

The Comptroller’s decision to issue or deny a Certificate of Full or Partial Exemption and the determination of the amount of tax to be withheld if a partial exemption is granted are final and not subject to appeal.

SPECIFIC INSTRUCTIONS

Enter the tax year of the transferor/ seller if other than a calendar year.

Transferor/Seller’s Information

Enter the name, address and identification number (Social Security number or federal employer identification number) of the transferor/ seller applying for the exemption.

If the transferor/seller was issued

an individual taxpayer identification number (ITIN) by the IRS, enter the ITIN.

Check the box indicating the transferor/seller’s entity type.

Enter the transferor/seller’s ownership percentage of the property.

Property Information

Enter the description of the property, including the street address(es) for the property as listed with the State Department of Assessments and Taxation (SDAT), including county. If the property does not have a street address, provide the full property account ID numbers used by SDAT to identify the property.

Enter the date of closing for the sale or transfer of the property.

Enter the contract sales price of the property being sold or transferred.

Enter the property account ID number, if known. If the property is made up of more than one parcel and has more than one property tax account number, include all applicable property account ID numbers.

Check the box that describes the transferor/seller’s acquisition of the property. Check the box that describes the transferor/seller’s use of the property at the time of the current sale, and enter the length of time

the property has been used for this purpose.

Complete the transferor/seller’s adjusted basis section by entering the purchase price when the transferor/ seller acquired the property, adding the cost of capital improvements (including acquisition costs such as commissions and state transfer taxes), and subtracting depreciation, if applicable. If inherited property, use the Date of Death value of the property.

Transferee/Buyer’s Information

Enter the name and address.

Check the box indicating the transferee/buyer’s entity type.

Attach schedule if there are multiple transferees/buyers.

Reason for Full or Partial Exemption from Withholding

Check the box in the “Reason for Exemption” column that indicates the reason you are requesting a full or partial exemption from the income tax withholding requirements.

Specific Line Instructions for Reason for Full or Partial Exemption

Line 1. Transfer is of your principal residence as defined in §121 of the Internal Revenue Code, which means it has been your principal residence for two of the last five years.

Required Documentation: Copy of contract of sale or copy of estimated HUD-1 settlement sheet; copy of HUD-1 settlement sheet from purchase of property, if claiming settlement expenses as part of adjusted basis; and receipts and invoices for any capital improvements you are claiming.

Line 2. Transfer is a tax-free exchange for purposes of §1031 of the Internal Revenue Code.

Required documentation: Letter signed by the qualified intermediary, or by the person authorized to sign on behalf of a business entity acting as the qualified intermediary, which states the name(s) of the transferor(s), the property description, that the individual or business will be acting as the qualified intermediary for

the transferor(s) as part of a §1031 exchange of the property, whether there will be any boot, and if so, the amount of boot. The amount of any boot must be stated on the application as the taxable amount.

Line 3. Transfer is pursuant to an installment sale under §453 of the Internal Revenue Code.

Required documentation: Copy of contract of sale or copy of HUD-1 settlement sheet; copy of promissory note to transferor which will be executed by transferee at settlement. That portion of the total payment that the transferor receives at or within sixty (60) days of settlement must be stated on the application as the taxable amount.

Line 4. Transfer of inherited property is occurring within 6 months of date of death.

Required Documentation: Provide a copy of the death certificate and a copy of the estimated HUD-

1 settlement sheet from the title company.

Line 5. Transferor/seller is receiving zero proceeds from this transaction.

Required Documentation: A copy of a letter from the transferor/seller to the title company advising they are to receive zero proceeds from the sale and advising to whom the proceeds are to go; a copy of the acknowledgment letter from the title company to the transferor/seller.

Line 6. Transfer is one of the following transactions. Please note the code letter and record it in the box on page 2 of Form MW506AE.

a. Transfer is to a corporation con- trolled by the transferor for purposes of §351 of the Internal Revenue Code.

Required documentation: Copy of the agreement of sale; Certificate of Good Standing of transferee is- sued by the state in which transferee is incorporated; notarized affidavit executed on behalf of transferee by its President and its Treasurer stating that immediately after the exchange the transferor(s) will own stock in the transferee possessing at least eighty percent (80%) of the total combined voting power of all classes of trans- feree’s stock entitled to vote and at least eighty percent (80%) of the total number of shares of all other classes of stock of the transferee; and an apprais- al establishing the fair market value,

at the time of the exchange, of any

property other than stock in the trans- feree which is part of the consideration for the exchange. The fair market value of any such other property and/or any money which is part of the con- sideration for the exchange must be stated on the application as the taxable amount.

b. Transfer is pursuant to a tax-free reorganization as described in §361 of the Internal Revenue Code.

Required documentation: Copy of agreement governing the transfer between transferor and transferee; Cer- tificates of Good Standing of transferor and transferee issued by the state(s) in which transferor and transferee are incorporated; copy of the plan or reor- ganization showing that transferor and transferee are parties to the reorgani- zation; and an appraisal establishing the fair market value, at the time of the exchange, of any property other than stock or securities in the transferee which is part of the consideration for the exchange and will not be distribut- ed by the transferor in pursuance of the plan of reorganization. The fair market value of any such other property and/or any money which is part of the con- sideration for the exchange must be stated on the application as the taxable amount.

c. Transfer is by a tax-exempt entity for purposes of §501(a) of the Internal Revenue Code and transfer involves limited or no unrelated business tax- able income under §512 of the Internal Revenue Code.

Required documentation: Copy of determination by the Internal Revenue Service that transferor is a tax-exempt entity for purpose of §501(a) of the Internal Revenue Code; Certificate of Good Standing of transferor issued by the state in which transferor is incorpo- rated; notarized affidavit executed on behalf of transferor by its President and by its Treasurer stating that the transfer involves limited or no unrelated busi- ness income under §512 of the Internal Revenue Code.

d. Transfer is to a partnership in exchange for an interest in the part- nership such that no gain or loss is recognized under §721 of the Internal Revenue Code.

Required documentation: Copy of agreement governing transfer between transferor and transferee; copy of the partnership agreement of the trans- feree.

e. Transfer is by a partnership to a partner of the partnership in accor- dance with §731 of the Internal Rev- enue Code.

Required documentation: Copy of agreement governing transfer between transferor and transferee; copy of the partnership agreement of the transferor.

f. Transfer is treated as a transfer by a real estate investment trust for pur- poses of §857 of the Internal Revenue Code.

Required documentation: Copy of agreement governing transfer between transferor and transferee; certified copy of Articles of Incorporation of trans- feror; Certificate of Good Standing of transferor issued by the state in which transferor is incorporated.

g. Transfer is pursuant to a condem- nation and conversion into a similar property for purposes of §1033 of the Internal Revenue Code.

Required documentation: Copy of agreement governing transfer between transferor and government body or authority condemning the property; notarized affidavit executed by trans- feror stating that transferor will identify and purchase replacement property within the time limits required by §1033 of the Internal Revenue Code, or copy of contract of sale if transferor has already identified replacement property. If proceeds from condemnation exceed price of replacement property, the ex- cess must be stated on the application as the taxable amount.

h. Transfer is between spouses or in- cident to divorce for purposes of §1041 of the Internal Revenue Code.

Required documentation: Copy of marriage license or divorce decree; copy of deed which will be recorded to accomplish the transfer; if incident to divorce, copy of section of court order or separation agreement governing transfer of the property.

i. Transfer is treated as a transfer by an S corporation for purposes of §1368 of the Internal Revenue.

Line 7. Other. The transfer is otherwise fully or partially exempt from the recognition of gain in accordance with provided explanation.

Required documentation: Attach any and all documents necessary to show that the transfer is fully or partially exempt from tax. This may include a copy of contract of sale or copy of estimated HUD-1 settlement sheet; copy of HUD-1 settlement sheet from purchase of property, if claiming settlement expenses as part of adjusted basis; and receipts and invoices for any capital improvements you are claiming.

Calculation of Tax to be Withheld

Complete this section if you are requesting a partial exemption. This section must be completed or the application for partial exemption will be denied.

Signature(s)

Form MW506AE must be signed by an individual (both taxpayer and spouse, if filing a joint Maryland income tax return), or a responsible corporate officer.

Please include a daytime telephone number where you can be reached between 8:00 AM and 5:00 PM.

Your signature(s) signifies that your application, including all attachments, is, to the best of your knowledge and belief, true, correct and complete, under the penalties of perjury.

If a power of attorney is necessary, complete federal Form 2848 and attach to your application.

Where to File

Mail the completed form and all attachments to:

Comptroller of Maryland

Revenue Administration Division

Attn: NRS Exemption Requests

P.O. Box 2031

Annapolis, MD 21404-2031

Additional Information

For additional information visit www.marylandtaxes.com, e-mail nrshelp@comp.state.md.us or call

1-800-MDTAXES (1-800-638-2937) or 410-260-7980 in Central Maryland.

Common mistakes

  1. Incomplete Information: One of the most common mistakes is failing to provide all required information. Ensure that every section of the form is filled out completely, including the names, addresses, and Social Security numbers of both the transferor/seller and the transferee/buyer.

  2. Missing Signatures: The form must be signed by the transferor/seller and, if applicable, their spouse. Omitting signatures can lead to delays or rejection of the application.

  3. Incorrect Entity Type: Selecting the wrong entity type can cause confusion and may result in the application being processed incorrectly. Carefully check the options and ensure the correct entity type is marked.

  4. Failure to Attach Documentation: Each reason for exemption requires specific supporting documents. Not attaching these documents can lead to denial of the exemption request. Always review the instructions for required documentation.

  5. Submitting Late: The completed form must be received by the Comptroller of Maryland at least 21 days before the closing date. Late submissions will not be accepted, so plan ahead and mail your application early.

  6. Calculation Errors: Mistakes in calculating the tax to be withheld can create significant issues. Double-check all calculations, especially the adjusted basis and the amount subject to withholding to ensure accuracy.

Free Maryland Mw506Ae PDF

Learn More on This Form

What is the purpose of the Maryland MW506AE form?

The Maryland MW506AE form is used to apply for a Certificate of Full or Partial Exemption from the withholding requirements on the proceeds of the sale of real property and associated personal property in Maryland. This form is specifically for nonresident individuals and entities. If you are a nonresident selling property in Maryland, completing this form can help you avoid unnecessary withholding of state taxes on your sale proceeds.

Who is eligible to file the MW506AE form?

Eligibility to file the MW506AE form extends to various parties, including individuals, fiduciaries, corporations, limited liability companies, and partnerships. If you are a nonresident seller, you can apply for the exemption. However, if you are a married couple filing jointly, each spouse must complete a separate form unless specified otherwise.

When must the MW506AE form be submitted?

The completed MW506AE form must be received by the Comptroller of Maryland at least 21 days before the closing date of the property sale. This timeline is critical to ensure you receive your Certificate of Full or Partial Exemption in time to avoid any withholding at closing. Missing this deadline could result in automatic withholding of taxes from your sale proceeds.

What information is required on the MW506AE form?

When filling out the MW506AE form, you will need to provide detailed information about both the transferor (seller) and the transferee (buyer). This includes names, addresses, Social Security numbers or federal employer identification numbers, and the property details such as description, sales price, and account ID number. Additionally, you must indicate the reason for seeking the exemption and provide any necessary documentation to support your claim.

What happens after submitting the MW506AE form?

After submission, the Comptroller of Maryland will review your application. Their decision regarding the issuance or denial of the Certificate of Full or Partial Exemption is final and cannot be appealed. If approved, you will receive the certificate, which must be presented at closing to avoid withholding. If denied, you may be subject to withholding on the sale proceeds.