The FTB will begin imposing failure to withhold penalties against qualified intermediaries who actively participate in structures where boot or proceeds from an attempted like-kind exchange are converted into an installment note, or similar arrangement, in which payments are to be paid out over two or more years. (FTB Notice 2019-05)
Qualified intermediaries must withhold on payments in excess of $1,500 at a rate equal to 3⅓% of proceeds received, or an alternative withholding amount based on actual gain received. This applies to proceeds from failed exchanges, boot, or excess debt relief. The penalties, which are equal to the greater of $500 or 10% of the amount that should have been withheld, may be imposed beginning with attempted like kind exchanges involving installment notes, or similar arrangements, in which property is relinquished on or after March 24, 2020.