A heavily encumbered property sells for $200,000.00 with anticipated total cash proceeds to the out-of-state seller of $2,600. If the Seller is subject to the Colorado Department of Revenue Withholding Tax, the closing must withhold:

1. $52.00

2. $4,000.00

3. $520.00

4. $2,600.00

4) $2,600.00

Explanation:

According to the Colorado Department of Revenue DR 1083, any real estate transaction in excess of $100,000 that involves an out of state seller will result in a tax withholding equal to the lesser amount between:

2% of the sales price the net proceeds from the sale

In this case, 2% of the sales price is $4,000 but the net proceeds are lower ($2,600), so the lowest amount should be withheld.