Bulletin: DE2011001

Dear Associates:

On June 11, 2010, Governor Markell signed into law House Bill No. 349 , having an effective date of December 31, 2010; said House Bill No. 349 requires non-resident sellers of real property situate in Delaware to file and pay estimated income tax on capital gains realized from the sale of real property situate in Delaware prior to the recording of any deed conveying Delaware real property. A non-resident seller includes not only an individual or a foreign corporation, but also a non-resident individual or foreign corporation owning a beneficial interest in a Delaware pass-through entity, such as a limited liability company.

Attached please find Form 5403 - 2011 Real Estate Tax Return Declaration of Estimated Income Tax, which must be completed and submitted to the Recorder of Deeds, at the time of the recording of the deed conveying Delaware real property. House Bill No. 349 does indicate that title agents, attorneys, brokers and other parties to the transaction are not liable for collecting or paying the estimated tax; however the Recorder of Deeds will not accept a deed for recording after December 31, 2010, that is not accompanied by this form; whether or not the seller is a resident or non-resident of Delaware.

Form 5403 does provide for a deferral of the payment of tax if there is insufficient information to determine if the sale or exchange is subject to withholding at the time of transfer. However, once such information is available, payment of tax may be due and the appropriate return must be timely filed.

Please feel free to contact the Delaware State Office at (302) 651-9201 with any questions or concerns.

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