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Non-Resident Sellers Must Pay or Estimate Real Estate Tax on Gains at Time of Settlement

Happy New Year. 

Effective January 1, 2011, all non-resident sellers of Delaware real estate (individuals, corporations and pass-thru entities) are required to file a Real Estate Tax Return and pay the Real Estate Tax or estimate thereof of 6.95% of the value of the gain on the sale of the real estate at the time of settlement.  The new statute, passed into law in June 2010, prohibits the recording of the Deed without the filing of the tax return and payment of the tax. 

The Delaware Division of Revenue has created Form 5403, 2011 Real Estate Tax Return Declaration of Estimated Income Tax Return which is to be completed and presented at the time of recording the deed.  The tax return contains certain “check box” options, e.g., no capital gain recognition or the seller does not have sufficient information to determine if tax is due.  Nonetheless the tax return must be completed and filed along with the deed.  Therefore, in order to ensure a smooth settlement, it is incumbent upon the real estate agents representing sellers to make sure the seller receives and completes the tax return prior to settlement.

For more information, please contact the real estate attorneys at Elzufon Austin & Mondell, P.A.

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