Sandra is a New Hampshire resident who inherited a lakefront property in Sebago Lake, Maine, from her aunt. She decides to sell the property for $280,000 to a Maine buyer. Sandra believes no withholding is required because she is selling an inherited property. Her listing broker must advise her correctly. Which statement best describes the withholding obligation in this transaction?
Correct Answer
A) The buyer or closing agent must withhold 2.5% of the $280,000 sale price unless Sandra obtains a certificate of exemption showing her Maine tax liability is zero
Maine's non-resident withholding rules apply to all non-Maine residents selling Maine real property, regardless of how the property was acquired (purchase, inheritance, gift, etc.). Because Sandra is a New Hampshire resident, the buyer or closing agent must withhold 2.5% of the $280,000 consideration ($7,000) and remit it to Maine Revenue Services as a prepayment of Sandra's potential Maine income tax liability. The only way to avoid withholding is if Sandra obtains a certificate of exemption from Maine Revenue Services demonstrating that her Maine tax liability on the gain is zero or that another exemption applies.
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Key Terms:
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