Hawaii help please

[nwtaxlady]

Client lives on the mainland. Client has had this rental in Maui since 1973 and now has sold this rental. I have the Seller's Final Settlement Statement and on their is listed the HARPTA - Withholding to Hawaii Department of Taxation. This is the 5% of the sales price.

My question is....

How is this handled when we file the Nonresident Hawaii return?

And is this 5% HARPTA tax added to the basis on the Federal return?

Any help would be appreciated. Also, When I bought this tax business this was a long time client and the basis for the house is only $37,000. I was told back then that the people did not own the land, they leased it from Hawaii for 99 yrs. NOW talking with the client, they say they do own the land. Iam confused and what to do??

Thanks!!

[Burke]

If this is indeed withholding as you indicate, you simply take credit for it on the Hawaii tax return when it is filed, like any other withholding. And there is no addition to basis on the federal return under normal tax rules. The taxpayer should be able to verify whether he owns the land or not with a copy of the deed.

[Uncle]

Harpta

Client lives on the mainland. Client has had this rental in Maui since 1973 and now has sold this rental. I have the Seller's Final Settlement Statement and on their is listed the HARPTA - Withholding to Hawaii Department of Taxation. This is the 5% of the sales price.

My question is....

How is this handled when we file the Nonresident Hawaii return?

And is this 5% HARPTA tax added to the basis on the Federal return?

Any help would be appreciated. Also, When I bought this tax business this was a long time client and the basis for the house is only $37,000. I was told back then that the people did not own the land, they leased it from Hawaii for 99 yrs. NOW talking with the client, they say they do own the land. Iam confused and what to do??

Thanks!!

The HARPTA is treated as an estimated tax on the Hawaii State tax return. Your client claims it on their N-15.

[Burke]

Also, When I bought this tax business this was a long time client and the basis for the house is only $37,000. I was told back then that the people did not own the land, they leased it from Hawaii for 99 yrs. NOW talking with the client, they say they do own the land. Iam confused and what to do??

Thanks!!

That kind of depends on what amount has been depreciated all the years it has been rental property. Did the original and continuing depreciable basis include the entire purchase price? If so, an adjustment may need to be made on the tax return when the sale is reported if the land was part of the depreciation taken.

[taxea]

That kind of depends on what amount has been depreciated all the years it has been rental property. Did the original and continuing depreciable basis include the entire purchase price? If so, an adjustment may need to be made on the tax return when the sale is reported if the land was part of the depreciation taken.

The sale is reported on the 1040 and any gain transfers to Hawaii through AGI. The gain is Hawaii income. The withholding on the Statement is Hawaii tax withheld.

[nwtaxlady]

That kind of depends on what amount has been depreciated all the years it has been rental property. Did the original and continuing depreciable basis include the entire purchase price? If so, an adjustment may need to be made on the tax return when the sale is reported if the land was part of the depreciation taken.

NO, the depreciation was not taken on land! The $37,000 is for only the house.

[Burke]

Well, no adjustment on depr needed then. But IF he actually bought the land rather than leasing it, that cost would be included in the calculation of the gain, of course.

[taxea]

If this is indeed withholding as you indicate, you simply take credit for it on the Hawaii tax return when it is filed, like any other withholding. And there is no addition to basis on the federal return under normal tax rules. The taxpayer should be able to verify whether he owns the land or not with a copy of the deed.

A check of Hawaii County assessor's office will also tell you who owns the land.