It is important to recognize that different states may have different withholding requirements.  Equity 1031, LLC recommends that the investors consult with their tax advisors to understand the withholding requirements of their particular states.  For example, when selling real properties in California, the state requires a withholding tax of three and one third of a percent of the total sales price if the total gain exceeds $100,000.00.  Note that this withholding requirement is based on the real properties being in California, regardless where the investors may live. 

The investors may be exempt from withholding if they sell the investment properties using 1031 exchanges.  Please see California Franchise Tax Board (FTB) form 593-C and 593-W for more information.  Some states that have withholding requirements include Colorado, Georgia, Hawaii, Main, Maryland, Mississippi, New York, South Carolina, Rhode Island and Vermont.  If you do not own real estate properties in these states, please check with your state to find out about its withholding requirements.  As always, consult with your tax attorney or accountants for specific advice.