Is withholding required on a transaction that qualifies as a Section 1031 exchange under the Internal Revenue Code? What if the transaction is a “deferred” Section 1031 exchange? - Alabama Department of Revenue

An official website of the Alabama State government.

The .gov means it's official

Government websites often end in .gov or .mil. Before sharing sensitive information, make sure you’re on an official government site.

The site is secure

The https:// ensures that you are connecting to the official website and that any information you provide is encrypted and transmitted securely.

Homepage
>
Is withholding required on a transaction that qualifies as a Section 1031 exchange under the Internal Revenue Code? What if the transaction is a “deferred” Section 1031 exchange?

Is withholding required on a transaction that qualifies as a Section 1031 exchange under the Internal Revenue Code? What if the transaction is a “deferred” Section 1031 exchange?

As in an exchange of property such as a like-kind exchange, withholding is not required on a Section 1031 exchange to the extent that the income from the sale is not subject to Alabama income tax. Transfers of real property under a Section 1031 exchange where gain may be realized by the seller, but completely not recognized by the seller for Alabama income tax purposes are not subject to the withholding provisions of Alabama Code Section 40-18-86. Transfers of real property where gain is realized by the seller, but partially not recognized by the seller for Alabama income tax purposes, are subject to the withholding provisions of Alabama Code Section 40-18-86 only to the extent of the recognized gain, such as a Section 1031 exchange where monies received by the seller exceed the exchange transaction. If the transaction is a “deferred” Section 1031 exchange, the transaction will qualify for the exemption to the withholding requirement only if the seller agrees to have the qualified intermediary file the required payment voucher and remit any withholding due to the Alabama Department of Revenue in the event that monies remain after the 180-day deferral period.

Is the money from a Florida 529 Savings Plan taxable if it is used to pay for my child’s higher education expenses?

Yes, once the withdrawal is made, it would be taxable on your Alabama income tax return.

When rolling over an out-of-state 529 plan to the CollegeCounts 529 Plan, is the rollover into the fund (contributions and earnings) exempt from any current year Alabama income tax?

The rollover is exempt from Alabama income tax.

Does Alabama income tax law recapture previously deducted contributions when withdrawing money from a CollegeCounts 529 Plan for non-qualified expenses?

Yes, the amount withdrawn is added back to the contributing taxpayer’s return, plus a 10 percent penalty.

If the money from my CollegeCounts 529 Plan is used to pay for my child’s expenses at an out-of-state college, will it be considered taxable?

No, the money is not taxable as long as the money is used to pay for higher education expenses.

Are rollovers from a CollegeCounts 529 Plan to an out of state plan subject to recapture of previously deducted contributions?

Yes.

What is the deadline for contributions to be deductible on your Alabama tax return?

The postmark date on your contribution will be accepted as the date of the contribution, as long as it is on or before December 31. The contribution does not have to be received by the plan on or before December 31.