California real estate disclosure laws California Real Estate Disclosures | Page 30

• The transaction must result in either a net loss or a net gain that is not required to be recognized for California income or franchise tax purposes. The seller must complete Form 593-L, “Real Estate Withholding-Computation of Estimated Gain or Loss.” • The property is subject to an involuntary conversion and, therefore, the transaction will qualify for non-recognition of gain for California income tax purposes under Internal Revenue Service Code Section 1033. • The property is being transferred by certain corporations, partnerships, or other entities which have no permanent place of business in California and/or otherwise qualify for an exemption. • The property is being transferred by a trustee under a deed of trust or a mortgage with a power of sale, or pursuant to a decree of foreclosure, or by a deed in lieu of foreclosure. There may be other restrictions, limitations, or exceptions for special circumstances. For more information, obtain IRS Publication 523, “Selling Your Home,” at www.irs.gov, or contact the IRS toll free at 1-800-8293676. In addition, withholding may be reduced or deferred when: • The sale qualifies as an IRS Code Section 1031 exchange. However, withholding will be required on any cash the seller receives. • The sale is an installment sale and the buyer agrees in writing to withhold on each principal payment including the down payment and on any balloon payment. The buyer must complete Form 593-I, “Real Estate Withholding Installment Sale Agreement.” For further information, contact the Franchise Tax Board and/or a qualified tax advisor. (CAL. REV. & TAX. § 18662) J. Furnishing Controlling Documents and Financial Statements Concerning Common Interest Developments (CID’s) The owner (other than a subdivider) of a separate interest in a common interest development (community apartment project, condominium project, planned development, or stock cooperative) must provide a prospective buyer with the following: • A copy of the governing documents of the development, including any operating rules and a copy of the association’s articles of incorporation, -23-