Under South Carolina's June 1990 guidance, when and how much did a buyer withhold from a nonresident seller of real estate?

Plain-English summary

South Carolina Revenue Ruling 90-3 placed the withholding duty on a buyer acquiring South Carolina real estate, or real estate with associated tangible personal property, from a nonresident seller. The ruling took effect June 1, 1990 and replaced RR 89-19 for sales from that date forward.

The ordinary withholding base depended on what the seller gave the buyer:

• with a qualifying affidavit stating recognized gain, the buyer withheld 7% of gain, or 5% if the seller was a corporation;
• without a gain affidavit, the buyer withheld 7% of amount realized, or 5% for a corporation; and
• in either case, the payment to the Commission could not exceed the net proceeds payable to the seller.

The buyer was liable for withholding and remitting the money. The seller later reported the actual gain or loss on a South Carolina income-tax return, used the withholding as a credit, and could obtain a refund of an excess amount.

Who counted as a nonresident

The ruling treated the following as nonresidents, subject to its stated exception:

• an individual whose fixed or permanent home was outside South Carolina at closing;
• a corporation not incorporated in South Carolina, unless it did no business in its incorporation state and had its principal place of business in South Carolina;
• a partnership whose principal place of business was outside South Carolina;
• a trust administered outside South Carolina; and
• an estate of a decedent whose fixed or permanent home was outside South Carolina at death.

For joint tenants and tenants in common, residency was determined separately for each co-owner. Withholding applied only to the nonresident owners' gain or amount realized.

The ruling also created a detailed "deemed resident" exception for a seller with South Carolina filing and business history who would continue substantially the same in-state business, timely report the sale, and, if a corporation or limited partnership, was registered to do business in the state. The buyer needed the seller's qualifying affidavit to rely on that exception.

Property and transfers covered

Covered property included any real-estate interest, including timeshares, leases, standing timber, and minerals in place. Tangible personal property was covered only when sold as part of a transaction involving a real-estate interest.

The ruling defined a sale as a taxable sale or exchange for which gain or loss was computed under Internal Revenue Code § 1001. If a deed was retained only as security, the sale occurred when the benefits and burdens of ownership transferred.

The ruling excluded tax-free or tax-deferred transactions other than installment sales. Its examples included gifts and inheritances, qualifying South Carolina replacement-property exchanges under § 1031, qualifying § 351 and § 721 exchanges, tax-free corporate reorganizations, specified government transfers, and transfers by § 501(a) organizations or South Carolina income-tax-exempt insurers.

Separate affidavit procedures addressed the historical principal-residence provisions in IRC §§ 1034 and 121 and involuntary conversions under § 1033. The seller had to acknowledge the South Carolina return and amended-return obligations stated in the ruling.

How withholding was calculated

Gain, amount realized, and the net-proceeds cap

"Gain" meant the § 1001(a) gain required to be included in South Carolina gross income. "Amount realized" meant the § 1001(b) amount used to calculate gain before subtracting basis.

Net proceeds were the sales price reduced by qualifying mortgages and liens on the property and selling expenses such as commissions, attorney fees, deed stamps, and termite or heating-and-air letter fees.

Loans or advances made in contemplation of the sale could not reduce net proceeds. A mortgage, lien, or credit-line advance made within one year before closing required an affidavit that it was not made to reduce withholding, unless the buyer otherwise knew the facts. The ruling excluded loans used entirely to buy or improve the property and loans made before July 1, 1989 from its "in contemplation" definition.

If the seller could not calculate exact gain at closing, the seller could give a qualifying affidavit stating a maximum gain. The ruling's example allowed later use of Form I-290X to recover over-withholding after uncertain improvement costs were resolved.

Remittance and allocation

The buyer generally had to pay the withholding by the fifteenth day of the month following the month of sale, using the historical Form I-290.

Multiple sellers required separate forms, except that a partnership, S corporation, estate, or trust received one form for the entity. The entity then allocated withholding among its partners, shareholders, or beneficiaries according to their ownership percentages and reported the credit on the applicable Schedule K-1.

The seller could apply the withholding against estimated income-tax liability. For the historical Form SC2210 calculation, the payment was treated like an estimated-tax payment made in the period when it was actually withheld.

Installment sales

For seller-financed installment sales, the buyer generally withheld from each payment. Without additional seller information, the ruling used a formula based on amount realized, selling price, and each payment amount; debt assumed or taken subject to was treated as a payment at sale.

A qualifying affidavit could reduce the calculation by establishing:

• corporate status, substituting 5% for 7%;
• an amortization schedule, so only principal rather than total principal and interest entered the payment factor; or
• total recognized gain, substituting gain for amount realized and applying the ruling's contract-price adjustments for qualifying debt.

If withholding due exceeded current net proceeds, the buyer paid the available net proceeds and carried the balance forward to the next payment.

The ruling allowed amounts under $500 to accumulate until the month they reached $500, but required any remaining calendar-year amount by January 15 of the following year. It also said no installment-sale withholding was required for a year when the total annual amount would be under $350, aggregating sales to one buyer or a related buyer group.

After the seller filed a return reporting a loss or the full gain, the seller could request a Commission letter exempting future principal payments. The buyer's duty stopped for future payments only after receiving that exemption.

Refunds, affidavits, and liens

The seller could use historical Form I-290X to request a refund when withholding was computed incorrectly, an exception was missed at closing, or the seller later established a lower gain. The ruling required an explanation, the original Form I-290 that otherwise would accompany the return, and a copy of I-290X with the return reporting the sale.

For the buyer to rely on an affidavit, it had to state under penalty of perjury the seller's identifying information, closing date, and property description—including county and tax-map numbers for real property—and the buyer could not know it was false. The buyer retained the affidavit for audit rather than sending it to the Commission.

Failure to withhold did not automatically leapfrog earlier recorded property liens. The ruling said an existing lien retained priority if filed before the Commission filed its lien, and the Commission would file only after establishing the withholding liability, assessing it, and issuing a warrant following the buyer's nonpayment.

What this means for you

Buyers and closing professionals

Under this historical guidance, the buyer—not the seller—carried the withholding and payment obligation. A complete affidavit could materially change or eliminate withholding, but the buyer could rely on it only when it contained the required facts and the buyer did not know it was false.

Nonresident sellers

Withholding was a prepayment, not the final tax. The seller still filed a South Carolina return reporting the actual gain or loss and claimed the withholding credit or refund.

Current transactions

Do not use the ruling's 1990 rates, forms, thresholds, mailing addresses, federal-law references, or affidavit without checking current South Carolina law and Department instructions.

Common questions

Q: Did withholding apply to every nonresident transfer?

A: No. The ruling listed tax-free and tax-deferred transfers and affidavit-based exceptions. Installment sales were covered by special rules rather than excluded.

Q: What happened if the seller gave no gain affidavit?

A: The buyer applied the 7% rate, or 5% corporate rate, to amount realized, subject to the net-proceeds cap.

Q: Could withholding exceed the cash payable to the seller?

A: No. The buyer met the immediate obligation by remitting the entire net proceeds payable to the seller; installment-sale shortfalls could carry forward under the ruling's special rules.

Q: Could a buyer rely on a simple statement that the seller lived in South Carolina?

A: Only if the affidavit contained the ruling's required identifying, closing, and property information, was made under penalty of perjury, and the buyer did not know it was false.

Q: How did the seller recover an excessive amount?

A: Before claiming the withholding on an income-tax return, the seller could use Form I-290X with the supporting items specified in the ruling. The seller also claimed withholding on the return reporting the sale.

Citations and references

• S.C. Code Ann. § 12-9-310 — provision amended in 1989 and replaced by Article 6, Chapter 9, Title 12
• Article 6, Chapter 9, Title 12, S.C. Code — historical replacement provisions effective June 1, 1990
• Internal Revenue Code § 1001 — gain and amount realized
• Internal Revenue Code §§ 102, 121, 351, 721, 1031, 1033, and 1034 — excluded or deferred transfers discussed
• Internal Revenue Code § 453 and Temporary Treasury Regulation § 15A.453-1 — installment-sale calculations
• Internal Revenue Code § 501(a) — exempt organizations discussed
• SC Revenue Ruling 89-19 — superseded for sales made on or after June 1, 1990

Source

• Landing page: https://dor.sc.gov/advisory-opinion-search
• Original PDF: https://dor.sc.gov/sites/dor/files/policies/RR90-3.pdf

Original ruling text

SC REVENUE RULING #90-3
SUBJECT:

Withholding on Sales of Real and Associated Tangible Personal
Property by Nonresidents

CONTACT PERSON:

Jean P. Croft (803) 737-4440

EFFECTIVE DATE:

June 1, 1990

SUPERSEDES:

S.C. Revenue Ruling #89-19 and any oral directives in conflict
herewith. SC Revenue Ruling #89-19 may be relied upon for any sale
made before June 1, 1990.

REFERENCE:

S.C. Code Ann. Section 12-9-310 (As Amended 1989) Article 6,
Chapter 9, Title 12 (Added April 25, 1990)

AUTHORITY:

S.C. Code Ann. Section 12-3-170 (1976)
S.C. Revenue Procedure #87-3

SCOPE:

A Revenue Ruling is the Commission's official interpretation of how
tax law is to be applied to a specific set of facts. A Revenue Ruling is
public information and remains a permanent document until
superseded by a Regulation or is rescinded by a subsequent Revenue
Ruling.

PURPOSE:

This ruling is being issued in question and answer format to provide
guidance on the application of Article 6, Chapter 9, Title 12 effective
June 1, 1990.

Section 12-9-310 was amended, effective July 1, 1989, to require withholding on the proceeds of
sales of real and tangible personal property paid to nonresidents. This section was repealed and
replaced with Article 6, Chapter 9 of Title 12 which is similar in concept to the previous law but
differs in several respects.
The new law states that, in a sale of real and associated personal property by a nonresident, the
buyer is required to withhold seven percent (five percent if the seller is a corporation) of the gain
recognized by the nonresident seller. If the seller fails to provide the buyer with the required
affidavit stating the amount of gain, the buyer is required to withhold seven percent (five percent
for corporations) of the amount realized. If the amount required to be withheld and sent to the
Commission exceeds the net proceeds payable to the seller, the buyer will meet his obligation if
he remits the entire net proceeds.
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If a withholding payment made to the Commission is based on the amount realized, the seller
may file for a refund of any over-withheld amount by filing Form I-290X with the Commission
stating the amount of the gain required to be recognized.
When the nonresident seller files a South Carolina income tax return for the year of the sale and
reports the gain or loss on the sale, the seller will apply the amount withheld against any income
tax due and any excess will be refunded.
The following questions and answers (Q&As) are provided to give guidance in complying with
this statute.
Definitions
1.

Who is a Nonresident?
Subject to the exception in item g below, the following persons are nonresidents:
a) Individual - Any individual having his or her fixed or permanent home outside of South
Carolina at the time of the closing.
b) Corporation - Any corporation which is not incorporated in S.C., unless 1)it does no
business in its state of incorporation and 2)its principal place of business is South
Carolina.
c) Partnership - Any partnership whose principal place of business is located outside of
South Carolina.
d) Trust - Any trust that is being administered outside of South Carolina.
e) Estate - Any estate of a decedent who at death had his or her fixed or permanent home
outside of South Carolina.
f) Co-ownership - If two or more persons sell property which they own as joint tenants
with right of survivorship or as tenants in common, their respective residencies will be
determined separately. Withholding is only required on the gain or amount realized of
the nonresident co-owner or co-owners.
g) Exception - Any seller who meets all of the following conditions will be considered a
resident for purposes of this section:
1) The seller (a) has filed at least one South Carolina income tax return, (b) is not
delinquent with respect to filing any South Carolina income tax return, and (c) has
been in business in the State during the seller's last two taxable years (including the
year of sale); and
2) The seller is in business in South Carolina and will continue substantially the same
business in South Carolina after the sale; and

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3) The seller will report the sale on a South Carolina income tax return for the current
year and file it by its due date; and
4) If the seller is a corporation or limited partnership, it is registered to do business in
South Carolina.
If the seller furnishes an affidavit to the buyer which meets the requirements contained in
the answer to Q&A 23 and certifies that the above four requirements are met, the buyer
will not be liable for withholding.
2.

Can the buyer rely on the seller's determination of residency?

If the seller furnishes the buyer an affidavit which states that the seller is a resident of
South Carolina and meets the requirements in the answer to Q&A 23, the buyer will not be
liable for withholding.
3.

The sale of what type of property will require withholding?
a) The sale of any interest in real estate. This includes the sale of time shares, leases,
standing timber and minerals in place.
Withholding is not required when a loan which is secured by a mortgage on real estate
is assigned. Therefore, where a deed is retained merely as a security interest by a seller
who has sold property to a buyer under a "land contract", no withholding is required if
the seller assigns his rights under the land contract (including possession of the deed).
b) The sale of tangible personal property will also require withholding, but only if it is
sold as part of a transaction involving the sale of an interest in real estate.

4.

What is a sale?
A sale is any transfer where gain or loss for South Carolina income tax purposes would be
computed in accordance with Section 1001 of the Internal Revenue Code; i.e. any taxable
sale or exchange. A sale takes place when it takes place for South Carolina income tax
purposes. If the seller retains the deed purely as a security device, the sale takes place
when the benefits and burdens of ownership are transferred, not when the deed is finally
delivered.
A sale does not include tax exempt or tax deferred transactions (other than installment
sales). Examples of transactions which are not "sales" include, but are not limited to:
a. Gifts and inheritances which are tax free under Section 102 of the Internal Revenue
Code.
b. Those like - kind exchanges which are tax deferred under Section 1031 of the Internal
Revenue Code provided the property received in the exchange is located in South
Carolina.
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c. Tax free exchanges of property for stock in a corporation which qualify under Section
351 of the Internal Revenue Code.
d. Tax free exchanges of property for a partnership interest under Section 721 of the
Internal Revenue Code.
e. Transfers of property as part of a tax free corporate reorganization.
f. Transfers of property from the U.S. Government, agencies of the U.S. Government,
South Carolina and its agencies and political subdivisions. These transfers include
sales by the Resolution Trust Corporation and any other transfer made by a deed signed
by a federal or South Carolina judicial or other government official acting in his or her
official capacity.
g. Transfers of property from organizations exempt from income taxes under Internal
Revenue Code Section 501(a) and insurance companies exempt from South Carolina
taxes on income.
5.

What about the sale of a principal residence where the seller intends to defer his taxes by
rolling over the proceeds into a new principal residence pursuant to Section 1034 of the
Internal Revenue Code or intends to use his one time exclusion of up to $125,000 pursuant
to Section 121 of the Internal Revenue Code?

The buyer will not be liable for withholding if he obtains an affidavit from the seller which
meets the requirements contained in the answer to Q&A 23 and states that:
a) The sale will not be subject to taxes because of Section 1034 or 121 of the Internal
Revenue Code; and
b) The seller acknowledges his obligation to file a South Carolina income tax return for
the year of the sale; and
c) The seller acknowledges his obligation to file an amended South Carolina income tax
return for the year of the sale if the seller fails to comply with Section 1034.
Note that the special provisions of Section 1034(h) of the Internal Revenue Code granting
an extended replacement period for members of the Armed Forces on extended duty are
applicable for South Carolina income tax purposes.
6.

What about a sale that qualifies as an involuntary conversion or condemnation and the
seller elects nonrecognition of the gain under Internal Revenue Code Section 1033?

The buyer will not be liable for withholding if he obtains an affidavit from the seller which
meets the requirements contained in the answer to Q&A 23 and states that:
a) The sale will not be subject to tax because of Section 1033 of the Internal Revenue
Code; and
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b) The seller acknowledges his obligation to file a South Carolina income tax return for
the year of the sale; and
c) The seller acknowledges his obligation to file an amended South Carolina income tax
return for the year of the sale if the seller fails to comply with Section 1033.
7.

If the sales price is paid or advanced to an employee by an employer or a relocation
service, will the payment to the employee and the ultimate sale of the property be treated as
one sale or two separate sales for the purposes of withholding?

When the employee treats the ultimate sale as a sale on his income tax return and neither
the employer nor the relocation service is required to treat it as a sale for income tax purposes,
then the sale is from the employee to the ultimate purchaser and only it is subject to withholding.
When the employer or relocation service is required to treat the advance and the ultimate
sale as a purchase and sale by it, then both transactions, (1) the sale from the employee to the
employer or relocation service, and (2) the sale from the employer or relocation service to the
ultimate purchaser, may be subject to withholding.
The identity of the seller should not be determined by looking at the deed.
If the buyer obtains an affidavit from the employer or relocation company stating that it is
the seller, and stating that (1) the transaction is exempt from withholding or (2) the amount
of gain, then the buyer may rely on such an affidavit and withhold based on it.
Computing Withholding
8.

How much should the buyer withhold and send to the Tax Commission?
If the buyer receives an affidavit from the seller which meets the requirements of Q&A 23
and states the amount of gain the seller is required to recognize, the amount which should
be withheld is 7% (5% if the seller is a corporation) of the gain.
If the seller does not provide the buyer with the amount of gain, the buyer shall withhold
7% (5% if the seller is a corporation) of the amount realized by the seller on the sale.
The withholding amount for an association or trust that is taxed as a corporation is 5%.
See Q&A 10 for the definitions of gain and amount realized.
Note, however, the amount to be withheld and sent to the Commission will never exceed
the net proceeds payable to the seller (as discussed in Q&A 9).

9.

What if the amount to be withheld and sent to the Commission (determined in Q&A 8
above) is greater than the net proceeds payable to the seller?

5

If the amount to be withheld and sent to the Commission is greater than the net proceeds of
the sale, the buyer is only responsible for withholding and sending the entire net proceeds
to the Commission.
See Q&A 11 for the definition of net proceeds.
10.

How are gain and amount realized defined for purposes of determining the amount to be
withheld and sent to the Commission?
Gain is computed as provided in Section 1001(a) of the Internal Revenue Code as adopted
for South Carolina income tax purposes. Gain recognized is the amount required to be
included in the seller's South Carolina gross income.
The amount realized on the sale is defined in Internal Revenue Code Section 1001(b) as
adopted for South Carolina income tax purposes. It is the amount used for computing gain
before subtracting the basis of the property.

11. If, pursuant to Q&A 9, the amount to be withheld is the entire net proceeds payable to the
    seller, how are net proceeds payable to the seller defined?
    The net proceeds payable to the seller are computed by reducing the total sales price by:
    a. Mortgages and liens
    Only mortgages and liens on the property being sold may be deducted from the sales price.
    Liens, mortgages or advances on credit lines in contemplation of the sale cannot be deducted.
    Unless the buyer knows otherwise, the buyer can presume that any liens, mortgages or
    advances on credit lines made more than one year before the closing are not in contemplation of
    the sale and may be deducted. If the lien, mortgage or credit line advance is made less than one
    year prior to the closing, the buyer cannot deduct the mortgage, lien or credit line advance unless
    the buyer obtains an affidavit from the seller, which states that the loan or advance was not made
    in contemplation of the sale and meets the requirements contained in the answer to Q&A 23.
    A loan or advance made in contemplation of the sale is a loan or advance which has as one
    of its purposes reducing the amount withheld. It does not include loans or advances where the
    entire proceeds are used to purchase or improve the property being sold and it does not include
    loans made prior to July 1,1989.
    b. Selling expenses, such as:
    1) real estate commissions
    2) attorney fees
    3) deed stamps
    4) termite, heating & air letter fees.

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12.

What if the seller wants the withholding computed on his recognized gain but he does not
know the exact amount of the gain?
The seller may file an affidavit with the buyer stating the amount of gain required to be
recognized on the sale and the buyer will compute the withholding based on this amount.
However, in certain circumstances, the seller may not be able to accurately compute the
gain at the time of the closing. In these cases, the seller may file an affidavit with the buyer
meeting the requirements of Q&A 23 and stating that the gain required to be reported on
the seller's income tax return will not exceed a stated amount.
For example, the seller may have bought a building for $150,000, spent $10,000 to fix-up
the building, and then sold it for $200,000. The seller may not be sure if the fix-up
expenses qualify as additions to basis. Therefore, he may file an affidavit with the buyer
stating that the gain on the sale will not exceed $50,000. If, after consultation with his tax
advisor, the seller determines that the expenses do qualify as additions to basis, he may file
Form I-290X and receive a refund of the over-withheld amount. (See Q&A 20.)

Liability
13.

Who is liable for the withholding and payment?
The buyer is liable for withholding and paying the money to the Commission.

Payments
14.

When is the payment due?
The tax must be paid on or before the fifteenth day of the month following the month in
which the sale took place, except as provided in Q&A 18 for installment sales.
Although payment is not required before the time provided above, the buyer may pay the
withholding amount to the Commission as soon after the closing as desired.

15.

How is the payment to be made?
The buyer should use Form I-290 (Rev 5/90) when paying the withholding amount. A
copy of this form is attached to this ruling.
If there is more than one seller, e.g. tenants in common, a separate Form I-290 should be
used for each seller. However, if the seller is a partnership, Subchapter S corporation,
estate or trust, the buyer should issue one Form I-290 to the entity, reporting the total
amount of withholding. The entity will then allocate the tax withheld to each partner,
shareholder or beneficiary in proportion to their percentage ownership in the property sold.
This amount should be reported to the taxpayers on the applicable Form K-1 as an "Other
credit or expenditure" and designated as "South Carolina Income Tax Withheld on
Nonresident Real Estate Sale".

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Four copies of Form I-290 should be completed for each sale. The buyer should send one
copy to the Tax Commission with payment of the withheld amount. The seller should
receive two copies, one to be sent in with his income tax return reporting the sale and one
for his records. The buyer should retain one copy for his records.
Send Form I-290 and payment of the amount withheld to:
South Carolina Tax Commission
Real Estate Withholding
P.O. Box 125
Columbia, South Carolina 29214
16.

Can the withholding be used by the seller against his estimated income tax liability?
The seller may apply amounts withheld against his estimated income tax liability.

17.

How are the payments treated when completing Form SC2210?
The payments should be treated in the same manner as estimated tax payments when
completing Form SC2210, Underpayment of Estimated Tax by Individuals. The seller
should report amounts withheld as estimated taxes paid during the period in which the
withholding was actually withheld from his payments. For example, if a seller is a calendar
year taxpayer and payment is made to the seller on April 10th from which an amount is
withheld under this statute, the seller will report this as an estimated payment made prior to
April 15th. If the payment was made on April 20th, the seller will report this as an
estimated payment made after April 15th and before June 30th.

Special Rules for Installment Sales
18.

What about installment sales?
For sales other than installment sales the amount withheld must be paid over to the
Commission by the fifteenth day of the month following the month of sale. (See Q&A 14.)
If the seller finances all or part of the transaction, then the buyer is required to withhold as
provided below. In general, the buyer must withhold on each payment to the seller.
The buyer must give two copies of Form I-290 to the seller each time a payment is made to
the Commission. The amount which must be withheld will depend upon how much, if any,
information the seller provides the buyer.
General formula. If the seller does not provide the buyer with an affidavit containing any of
the information discussed below, then the buyer must use the following general formula.
Amount Realized1 x 7%
3
2
Selling Price x Payment Amount
1

Amount Realized is defined in Q&A 10.
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2

Selling Price means the gross selling price without reduction of any selling expenses and
without reduction to reflect any existing mortgage or other encumbrance on the property
(whether or not assumed or taken subject to by the buyer). It does not include interest or
original issue discount. (The term "selling price" is being used as it is used in U.S.
Treasury Regulation 15A.453-1(b)(2)(ii).)
3

"Payment Amount" means the total amount of each payment made by the buyer. It
includes interest whether stated or imputed. The total amount of debt assumed or taken
subject to by the buyer is deemed to be a payment made at the time of the sale. If at any
time the amount of withholding due is greater than the net proceeds payable to the seller,
then (1) the net proceeds will be withheld and paid to the Commission, (2) the balance of
withholding which is not paid will be carried forward, and (3) the buyer will withhold and
pay it to the Commission from his next payment.
Example 1. On January 1, 1990 a seller sells real estate for $200,000 in cash to be
paid over 5 years. In addition, the buyer takes the property subject to a $50,000
mortgage. The loan giving rise to the mortgage was not made in contemplation of the
sale. (See Q&A 11a.) Selling expenses are $2,000. The buyer will pay the $200,000
over 5 years with 10% interest by making quarterly payments of $12,829. The first
payment is due April 1, 1990. If the seller does not give the buyer an affidavit, the
buyer will withhold based upon the general formula given above.
The first payment requiring withholding is made at closing (the $50,000 mortgage the
buyer is taking the property subject to). -($250,000 - $2,000) x 7%
$250,000 x $50,000 = $3,472
Thus, $3,472 is required to be withheld. Since the seller is not receiving any net
proceeds at the closing, this amount is carried forward and will be withheld and paid
to the Commis- sion out of the funds to be paid the seller on April 1, 1990.
The buyer will determine the withholding on the April 1, 1990 payment in the same
manner -($250,000 - $2,000) x 7%
$250,000 x $12,829 = $891
Therefore, the buyer will withhold $4,363 ($3,472 from the mortgage deemed paid on
January 1 plus $891 from the April 1 payment) from his April 1, 1990 payment and
send it to the Commission by May 15, 1990.
Similarly on July 1, 1990, the buyer will withhold $891 and send it to the
Commission by August 15, 1990. And on October 1, 1990, the buyer will withhold
$891 and send it to the Commission by November 15, 1990.

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Modifications to general formula if the seller provides an affidavit. If the seller provides an
affidavit in accordance with Q&A 23, the buyer must make one or more of the following
modifications to the general formula, depending upon what the seller provides in his
affidavit. In general, the more information the seller provides, the smaller the amount the
seller will have withheld.
(1) Affidavit of Corporate Status. If the seller gives the buyer an affidavit stating that
it is a corporation (or an association or trust taxed as a corporation,) then the buyer
must substitute 5% for 7% in the general formula.
(2) Amortization Schedule. If the seller gives the buyer an amortization schedule
stating the principal and interest portion of each payment, then the buyer must
substitute the "principal payment amount" for the "payment amount" in the general
formula. The "principal payment amount" of each payment is the principal portion of
each payment. The total amount of debt assumed or taken subject to by the buyer is
deemed to be a principal payment at the time of the sale.
Example 2. The facts are the same as Example 1, but the seller gives the buyer an
amortization schedule which states the principal and interest portion of each
payment. For the payments due April 1, July 1, and October 1, the schedule
designates $7,829, $8,025, and $8,226, respectively, as the principal portions of
the payments.
The first payment requiring withholding is made at closing (the $50,000 mortgage
the buyer is taking the property subject to). -($250,000 - $2,000) x 7%
$250,000 x $50,000 = $3,472
Thus, $3,472 is required to be withheld. Since the seller is not receiving any net
proceeds at the closing, this amount is carried forward and will be withheld and paid
to the Commis- sion out of the funds to be paid the seller on April 1, 1990.
The buyer will determine the withholding on the April 1, 1990, payment in the same
manner, but using the "principal payment amount" as the "payment amount" -($250,000 - $2,000) x 7%
$250,000 x $7,829 = $543
Therefore, the buyer will withhold $4,015 ($3,472 from the mortgage deemed paid on
January 1 plus $543 from the April 1 payment) from his April 1, 1990 payment and
send it to the Commission by May 15, 1990.
Similarly, the buyer will determine the withholding on July 1, 1990 in the same
manner -($250,000 - $2,000) x 7%
$250,000 x $8,025 = $557
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The buyer will withhold $557 and send it to the Commission by August 15, 1990.
Again, on the October 1, 1990 payment, the buyer will determine the withholding in
the same manner -($250,000 - $2,000) x 7%
$250,000 x $8,226 = $571
The buyer will withhold $571 and send it to the Commission by November 15, 1990.
(3) Affidavit of Gain. If the seller gives the buyer an affidavit stating his total gain to
be recognized on the sale, then the buyer must substitute "gain" for the "amount
realized" in the general formula.
In addition, if the buyer is given the total gain on the sale and the buyer will assume
or take the property subject to a mortgage, the buyer will substitute "total contract
price" for "selling price" in the general formula.
"Total contract price" is defined as it is for Internal Revenue Code Section 453; i.e., it
is the "selling price" reduced by that portion of any "qualifying indebtedness"
assumed or taken subject to by the buyer which does not exceed the seller's basis in
the property. For the purposes of determining "total contract price" the seller's basis
includes selling expenses. (See U.S. Treasury Temporary Regulation 15A.4531(b)(2)(iii) and (iv).)
Moreover, the buyer must reduce the "payment amount" at the time of the sale by the
amount of qualifying indebtedness which does not exceed the seller's basis in the
property. For the purposes of determining the "payment amount", the seller's basis
includes selling expenses.
In general, "qualifying indebtedness" means a mortgage or other indebtedness
encumbering the property. Buyers may, at their election, use the more detailed
definition in U.S. Treasury Temporary Regulation 15A.453-1(b)(2)(iv).
Example 3. The facts are the same as Example 1, but the seller gives the buyer an
affidavit stating that his total recognized gain on the sale is $208,000. The buyer
will then substitute this amount for the amount realized in the general formula.
The buyer will also use the gain amount to compute the seller's basis in the
property. In this example the basis (including selling expenses) will be $42,000
($250,000 sales price less $208,000 gain.
Given the basis in the property and the fact that the property was transferred
subject to a mortgage, the buyer will then deduct from the selling price and the
payment amount the amount of the mortgage which does not exceed the seller's
basis plus selling expenses or $42,000. Therefore, the selling price of $250,000
reduced by this amount becomes the "total contract price" of $208,000. The
"payment amount" now becomes $8,000 ($50,000 mortgage reduced by $42,000
basis plus selling expenses).
11

The first payment requiring withholding is made at closing -$208,000 x 7%
$208,000 x $8,000 = $560
Thus, $560 is required to be withheld. Since the seller is not receiving any net
proceeds at the closing, this amount is carried forward and will be withheld and
paid to the Commis- sion out of the funds to be paid the seller on April 1, 1990.
The buyer will determine the withholding on the April 1, 1990 payment in the
same manner -$208,000 x 7%
$208,000 x $12,829 = $898
Therefore, the buyer will withhold $1,458 ($560 from the portion of the mortgage
deemed paid on January 1 plus $898 from the April 1 payment) from his April 1,
1990 payment and send it to the Commission by May 15, 1990.
Similarly on July 1, 1990, the buyer will withhold $898 and send it to the
Commission by August 15, 1990. And on October 1, 1990, the buyer will
withhold $898 and send it to the Commission by November 15, 1990.
Example 4. The facts are the same as Example 3 but the seller also provides the
buyer with an amortization schedule stating the principal and interest portions of
each payment. For the payments due April 1, July 1, and October 1, the schedule
designates $7,829, $8,025, and $8,225, respectively, as the principal portion of the
payments.
The first payment requiring withholding is made at closing -$208,000 x 7%
$208,000 x $8,000 = $560
Thus, $560 is required to be withheld. Since the seller is not receiving any net
proceeds at the closing, this amount is carried forward and will be withheld and
paid to the Commis- sion out of the funds to be paid the seller on April 1, 1990.
The buyer will determine the withholding on April 1, 1990, payment in the same
manner but using only the principal portion of the payment as the payment
amount -$208,000 x 7%
$208,000 x $7,829 = $548

12

Therefore, the buyer will withhold $1,108 ($560 from the portion deemed paid on
January 1 plus $548 from the April 1 payment) from his April 1, 1990 payment
and send it to the Commission by May 15, 1990.
Similarly, on July 1, the buyer will compute the withholding in the same manner $208,000 x 7%
$208,000 x $8,025 = $562
The buyer will withhold $562 and send it to the Commission by August 15, 1990.
Again, on October 1, the buyer will determine the withholding in the same
manner -$208,000 x 7%
$208,000 x $8,226 = $576
The buyer will withhold $576 and send it to the Commission by November 15,
1990.
Additional Relief for Installment Sales. When the amount to be withheld and paid to the
Commission on any payment is less than $500, the buyer may wait to remit the amounts
withheld to the Commission until the 15th day of the month following the month when the
amounts withheld equal $500 or more. However, even if amounts withheld during a
calendar year do not equal $500, they must be remitted to the Commission by January 15th
of the following year.
Note: Anything to the contrary notwithstanding, withholding on an installment sale is not
required for any year where the total amount to be withheld and paid over to the
Commission for the entire year would be less than $350. Sales to a single buyer or to a
related group of buyers are aggregated to determine if this limitation has been exceeded.
If the seller files a tax return reporting a loss on the sale or the entire gain on the sale, the
seller may apply to the Commission for a letter exempting future principal payments from
withholding. The Commission will forward a copy of the exemption to the seller and the
buyer. Upon receipt of the exemption letter, the buyer is relieved from withholding on any
future payments.
Refunds
19.

Can part or all of the withholding be refunded if the amount withheld and sent to the Tax
Commission was incorrect?

13

If the amount withheld and sent to the Tax Commission was incorrect because of an error
in computing the amount or the seller and buyer were unaware of the exceptions to the
withholding at the time of the closing, then part or all of the withholding may be refunded to the
seller.
The seller may submit a request for refund by filing Form I-290X along with 1) a statement
explaining the reasons for the correction and 2) the original Form I-290 which would have
been filed with his income tax return. Copies of both forms are attached to this ruling. The
seller must attach a copy of his Form I-290X to his income tax return reporting the sale.
20.

If the seller does not file an affidavit with the buyer stating the amount of gain he is
required to recognize or if he overestimated his gain, can he receive a refund from the
Commission?
Yes, if the seller has not filed an income tax return claiming the amount withheld as a
credit against his income tax liability, he can receive a refund from the Commission by
filing Form I-290X on which he will state the correct amount of gain subject to
withholding. The difference between the amount originally withheld and the amount
shown on the amended form will be refunded to the seller. The seller must attach a copy of
his Form I-290X to his income tax return reporting the sale.
The seller must attach the original Form I-290 which would have been filed with his
income tax return to the Form I-290X when filing for his refund.

21.

Can part or all of the withholding be refunded on sales completed before the effective date
of this act?
If amounts withheld on sales of real property and associated personal property completed
before the effective date of this act were greater than the amount that would have been
withheld under this act, and the seller has not filed an income tax return crediting the
withheld amount against his income tax liability, the seller may file for a refund of the
amount over-withheld.
The seller may submit a request for refund by filing with the Commission Form I-290X.
The seller must attach a copy of his Form I-290X to his income tax return reporting the
sale.
The seller must attach the original Form I-290 which would have been filed with his
income tax return to the Form I-290X when filing for his refund.

22.

Where should the request for refund be mailed?
The requests should be mailed to:
PRO - Real Estate Withholding
P.O. Box 11189
Columbia, S.C. 29211-1189

14

Affidavits
23.

When can the buyer rely on an affidavit referred to in this Revenue Ruling?
A buyer can rely on the facts contained in an affidavit referred to in this Revenue Ruling, if
a) It states under penalty of perjury:
1) The seller's name, address and social security number or taxpayer identification
number; and
2) The closing date of the sale; and
3) A description of the property. The description of real property must include the
county it is in and its tax map number(s); and,
b) The buyer does not know the affidavit is false.

24.

What should the buyer do with an affidavit from the seller?
The buyer should retain the affidavit with his records and produce it if requested during an
audit. The buyer should not send the affidavit to the Tax Commission.

25.

Where can I get an affidavit?
You can use a copy of the affidavit attached to this ruling or prepare your own.

Liens
26.

Does the failure to withhold create a lien which takes priority over mortgages on the property?
Any lien on the property will have priority over the obligation to withhold as long as it is
filed before the Tax Commission files a lien on the property. The Tax Commission will not
file a lien on the property until it establishes that an amount was required to be withheld and
remitted to the Commission, assesses the tax, and issues a warrant after the buyer fails to pay
the assessed tax.
SOUTH CAROLINA TAX COMMISSION
s/S. Hunter Howard Jr.
S. Hunter Howard, Jr., Chairman
s/A. Crawford Clarkson Jr.
A. Crawford Clarkson, Jr., Commissioner
s/Timothy R. McConnell
Timothy R. McConnell, Commissioner

Columbia, South Carolina
, 1990
June 1
15

Seller's Affidavit
South Carolina Withholding Tax
S.C. Code Section 12-9-510 et. seq.
THIS IS AN AFFIDAVIT OF FACTS. WHETHER OR NOT THIS AFFIDAVIT IS
SUFFICIENT TO RELIEVE THE BUYER OF THE RESPONSIBILITY TO WITHHOLD IS
GOVERNED BY SC REVENUE RULING 90-3. PLEASE READ THIS AFFIDAVIT
CAREFULLY IN CONJUNCTION WITH THIS RULING.
The undersigned on oath, being first duly sworn, hereby certifies as follows:

1. This affidavit is being given in connection with a sale of real estate pursuant to SC Revenue
   Ruling #90-3.
2. I have attached to this affidavit a description of the real property and any tangible personal
   property being sold as part of this sale.
   and its tax map number(s) is
   The real property is located in the county of
3. The undersigned is the seller of the property described in the attached description.
4. The closing date of this sale is

.

5. The Seller's name is

.

6. The Seller's address is
   (number, street or rural route)
   .
   (city, state and zip code)
7. The Seller's social security number or taxpayer identification number is

.

8. ┌──┐ Corporations. The seller is a corporation or an association or trust that is taxed as a
   corporation and is subject to withholding at 5%.
   9.
   ┌──┐ Gain. I affirm pursuant to Section 12-9-510(B) that
   the amount of gain I am required to recognize on this transaction and on which Buyer is to make
   the requisite withholding will not exceed $
9. ┌──┐ Installment Sale. The seller will report this sale on
   the installment method for South Carolina income tax purposes, and has attached an amortization
   schedule correctly designating the principal and interest portions of the payments.
10. ┌──┐ Resident. The seller is a resident of South Carolina, as that term is defined in the
    South Carolina income tax laws (S.C. Code Section 12-1-10 et seq. as amended) and in SC
    Revenue Ruling 90-3.
11. ┌──┐ Deemed Resident. Pursuant to SC Revenue Ruling #90-3 the seller is deemed to be a
    resident of South Carolina because:
    16

1) The seller (a) has filed at least one South Carolina income tax return, (b) is not
delinquent with respect to filing any South Carolina income tax return, and (c) has
been in business in the State during the seller's last two taxable years (including the
year of sale); and
2) The seller is in business in South Carolina and will continue substantially the
same business in South Carolina after the sale; and
3) The seller will report the sale on a South Carolina income tax return for the
current year and file it by its due date; and
4) If the seller is a corporation or limited partnership, it is registered to do business
in South Carolina.

13. ┌──┐ Employee Relocation. The transaction involves the sale of an employee's property
    which is being sold by an employer or Relocation company in connection with the employee's
    transfer. For income tax purposes the sale is treated as a sale by the employer or relocation
    company.
14. ┌──┐ Nonrecognition of Gain. The sale of the property will not be Subject to taxes because
    of Section 1033, 1034 or 121 of the Internal Revenue Code. The seller acknowledges his
    obligation to file a South Carolina income tax return for the year of the sale. If the seller fails to
    comply with Section 1033 or 1034, the seller acknowledges an obligation to file an amended
    South Carolina income tax return for the year of the sale.
15. ┌──┐ Tax-Exempt Organizations. The seller is an organization exempt from income taxes
    under Internal Revenue Code Section 501(a) or is an insurance company exempt from South
    Carolina taxes on income.
16. ┌──┐ Withholding Amount Equals Entire Net Proceeds. If the withholding amount is
    limited to the entire net proceeds, any lien, mortgage or credit line advance which was made
    within one year prior to the closing was not made in contemplation of the sale as that phrase is
    defined in SC Revenue Ruling #90-3.
    The undersigned understands that this affidavit may be disclosed to the South Carolina Tax
    Commission and that any false statement contained herein could be punished by fine,
    imprisonment, or both.
    Under penalties of perjury, I declare that I have examined this Affidavit and, to the best of my
    knowledge and belief, it is true, correct and Complete.
    (Signature)
    SUBSCRIBED AND SWORN to
    day
    before me this
    of
    , 1990.
    (Name - please print)
    Notary Public
    My Commission Expires:
    17