Tax Type
Individual Income Tax
Description
Nonresident Real Property Owner Registration
Topic
Partnerships
Date Issued
05-29-1991
May 29, 1991
Re: Request for Ruling: Nonresident Real Property Owner Registration
Dear******************
This will reply to your letter of December 18, 1990, requesting technical advice regarding the Virginia Nonresident Real Property owner Registration requirements applicable to real estate reporting persons involved in sales of real property located in Virginia.
FACTS
On November 7, 1990, you foreclosed as trustee on certain real property located in Virginia and owned by a Virginia general partnership (the "Partnership"). one of the general partners of the Partnership is believed to be a citizen and resident of Norway, the other general partner is a resident of Virginia.
The holder of the promissory note which secured the property was the successful purchaser at the foreclosure sale. The net proceeds from the sale were applied to reduce the indebtedness of the Partnership under the note. There will be (were) no excess proceeds for distribution to the Partnership or any of its partners.
Because the registration forms supplied by the Department of Taxation do not appear to address foreclosure transactions, specifically, you have not completed a form. Instead, you have reported the transaction by way of your letter, referenced above.
DISCUSSION
Va. Code §58.1-317(B) provides that the real estate reporting person, "as defined in § 6045(e) of the Internal Revenue Code and the regulations thereunder," who is involved in certain transactions transferring fee simple title in real property located in Virginia, shall obtain from the nonresident payee the Nonresident Real Property owner Registration form. Internal Revenue Regulation (Reg.) §1.6045-4(a) states, in part, that "[a] reporting person may also report with respect to transactions otherwise excepted in paragraphs (c) and (d) of this section."
Foreclosure transactions are specifically exempt from Federal Form 1099-S reporting requirements, under Reg. §1.6045-4(c)(ii). Therefore, the real estate reporting person defined under IRC §6045(e) (and Reg. §1.6045-4(e)) is not required to report the foreclosure transaction on Form 1099-S for federal purposes. However, the real estate reporting person, defined under IRC §6045(e) is not precluded from reporting such transactions.
RULING
The foreclosure sale is properly treated as a sale or exchange for federal income tax purposes, whether or not the transaction is currently taxable. The Virginia registration legislation requires the registration for foreclosure transactions, in addition to the transactions specifically required by the regulations under IRC §6045. The real estate reporting person for such transactions will be determined in accordance with the definitions provided in Internal Revenue Reg. §1.6045-4(e). However, for administrative convenience, the Virginia registration may be completed by the same person who is also responsible for preparing Federal Form 1099-A (required by IRC §6050J, and the regulations thereunder).
Because the partnership meets the definitions of a nonresident payee, i.e., a partnership which has any nonresident partner(s), who receives payments from the transfer of fee simple title in real property in the Commonwealth of Virginia, then inasmuch as you meet the definition of "real estate reporting person," for purposes of the registration, then you are required to file the registration form, copies enclosed .
Because you have attempted to comply in a timely manner by way of your letter dated December 18, 1990, no late filing penalties will be applied. Please attach a copy of this letter to your registration forms in order to facilitate processing.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner