Sec. 03.04.12.04. Certificate of Full or Partial Exemption

A. The transferor may file an Application for Certificate of Full or Partial Exemption (Form MW506AE) with the Comptroller.

B. The transferor shall:

(1) File the Application for Certificate of Full or Partial Exemption with the Comptroller at least 21 days before the settlement date;

(2) Indicate on the Application for Certificate of Full or Partial Exemption the reason or reasons the transfer qualifies for a full or partial exemption from the withholding tax; and

(3) Include with the Application for Certificate of Full or Partial Exemption sufficient documentation to support the request.

C. The Comptroller may issue a Certificate of Full or Partial Exemption for any of the following reasons:

(1) The tax due has been paid in full to the Comptroller;

(2) The transfer is to a corporation controlled by the transferor under §351 of the Internal Revenue Code (26 U.S.C. §351);

(3) The transfer is pursuant to a tax-free reorganization as described in §361 of the Internal Revenue Code (26 U.S.C. §361);

(4) The transfer is being made on an installment sale basis under §453 of the Internal Revenue Code (26 U.S.C. §453);

(5) The transfer is by a tax-exempt entity in accordance with §501(a) of the Internal Revenue Code (26 U.S.C. §501(a)) involving no unrelated business taxable income under §12 of the Internal Revenue Code (26 U.S.C. §12);

(6) The transfer is to a partnership in exchange for an interest in the partnership such that no gain or loss is recognized under §721 of the Internal Revenue Code (26 U.S.C. §721);

(7) The transfer is by a partnership to a partner of the partnership in accordance with §731 of the Internal Revenue Code (26 U.S.C. §731);

(8) The transfer is by a real estate investment trust under §857 of the Internal Revenue Code (26 U.S.C. §857);

(9) The transfer is a like-kind exchange under §1031 of the Internal Revenue Code (26 U.S.C. §1031);

(10) The transfer is occurring because of a condemnation and conversion into a similar property under §1033 of the Internal Revenue Code (26 U.S.C. §1033);

(11) The transfer is between spouses, or incident to a divorce in accordance with §1041 of the Internal Revenue Code (26 U.S.C. §1041);

(12) The transfer is by an S-corporation in accordance with §1368 of the Internal Revenue Code (26 U.S.C. §1368);

(13) The transfer is to a disregarded entity, classified as such under 26 CFR §301.7701-3, that is solely owned by the transferor; or

(14) The transfer is otherwise exempt as documented by the transferor.

D. The Comptroller's decision to issue or deny a Certificate of Full or Partial Exemption and the determination of the amount of tax to be withheld if a partial exemption is granted are final and not subject to appeal.

E. Like-Kind Exchange.

(1) Except as provided in §E(2) of this regulation, a like-kind exchange that qualifies under the provisions of §1031 of the Internal Revenue Code (26 U.S.C. §1031) and for which a Certificate of Full or Partial Exemption has been issued is not subject to the withholding requirements.

(2) If at the time of settlement it is known that the property does not qualify as a like-kind exchange under the provisions of §1031 of the Internal Revenue Code (26 U.S.C. §1031) or the transferor will receive taxable boot, then notwithstanding the issuance of the Certificate of Full or Partial Exemption, Regulation .03B(1) of this chapter applies to:

(a) The total payment; or

(b) The taxable boot.

F. Installment Sale.

(1) Except as provided in §F(2) of this regulation, an installment sale for which a Certificate of Full or Partial Exemption has been issued is not subject to the withholding requirements.

(2) Regulation .03B(1) of this chapter applies to that portion of the total payment that the transferor receives before, at, or within 60 days of settlement.