Richards Layton & Finger
 

Delaware Real Estate Law Update: Estimated Taxes for Non-Resident Sellers of Delaware Real Estate

August 24, 2010

On June 11, 2010, Governor Markell signed into law House Bill 349, which requires non-resident sellers of Delaware real estate to report and remit an estimated state income tax on capital gains recognized from the sale of that real estate. This payment must be made before the deed for that sale can be recorded. For purposes of this legislation, a non-resident seller includes not only an individual or a foreign (meaning non-Delaware) corporation, but also a non-resident individual or foreign corporation that owns a beneficial interest in a Delaware pass-through entity, such as a limited liability company. The legislation provides that the buyer and other persons involved in the transaction, such as brokers or attorneys, are not liable for collecting or paying the estimated tax. However, the fact that the deed cannot be recorded without the filing of the appropriate return and payment of the estimated tax by the seller means that the buyer of property in these circumstances is at risk without assurances that the estimated tax return has been properly filed and taxes paid, as otherwise the deed cannot be recorded. The legislation will be effective for tax periods commencing after December 31, 2010.
 

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