California Nonresident Withholding

[MikiD]

Hello,

I will be preparing a trust tax return for 2024, but need some clarification with respect to California Nonresident Withholding, Form 592.

This was a grantor revocable trust before the individual died in 2024, and became an irrevocable trust after death. The only asset in the trust was the principal residence of the person, which the heirs/beneficiaries are selling in few weeks. The beneficiaries are two siblings, one who is a resident of California and the trustee, and the second sibling is a Washington resident. Based on what I know, California nonresident withholding is required for the sibling living in Washington, 7 percent of the distribution... but I'm not certain how this is calculated. Is it 7 percent on the total distribution, or 7 percent on what will be capital gains (taxable income) from the sale of the property? The instructions indicate trust distributions need to have the withholding, but I think I also saw somewhere it states to exclude the return of capital, which would be the basis...

Thank you

[sjrcpa]

Who is the Seller? The trust?

Or the heirs?

[MikiD]

The trust is the seller

[Terry53029]

Just curious, you mention capital gains, but basis would be FMV  Most of the time I see no gains in a situation like you have.

[MikiD]

With the numbers they gave me, I still calculate a small gain - just over 5k. In my opinion, I think their assessor underestimated the FMV, and also they are not paying commission to the buyer's agent.