Magazine article The CPA Journal

Sales of Hawaiian Real Property by Nonresident

Magazine article The CPA Journal

Sales of Hawaiian Real Property by Nonresident

Article excerpt

Nonresident owners of Hawaiian real property should be aware of new regulations pertaining to sales of such property. Effective January 1, 1991 Hawaii requires every transferee who obtains real property from a nonresident person to deduct, withhold, and pay to Hawaii 996 of the property's sale price. This can lead to a grossly unfair situation since the actual tax liability on the sale is computed on the gain in the same manner as is done for Federal purposes. Hawaiian source gain is reported on Form N-15 (Individual Income Tax Return--Nonresident) and the tax is computed the same as other nonresident income. However, there are planning strategies to avoid paying the full 9% of the sales price to Hawaii and remedies for getting overpayments back quickly.

In anticipation of the sale of Hawaiian real property, a nonresident transferor/seller may file Form N-288B (Application for Withholding Certificate of Dispositions by Nonresident Persons of Hawaii Real Property Interest) to show no gain or a loss on the transfer no later than 10 working days prior to the date of transfer and include:

1. The name, address, and taxpayer identification number, if any, of the parties to the transaction;

2. The location and general description of the real property to be transferred; and

3. The calculation, justification, and supporting documentation showing that the transferor will not recognize any gain with respect to the transfer.

The Hawaii Department of Taxation will review the submission and determine whether transferor/seller has or will recognize any gain. …

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