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Foreign Investment in Real Property Tax Act

by Joseph J. Huggins on Jun. 10, 2016

Tax Income Tax 

Summary: In 1980, Congress enacted the Foreign Investment in Real Property Tax Act (FIRPTA), 26 U.S.C.S. 1445. The law provides that if a seller of real property is a "foreign person," the buyer must withhold a tax equal to 10% of the gross purchase price, unless an exemption applies under the law.

In 1980, Congress enacted the Foreign Investment in Real Property Tax Act (FIRPTA), 26 U.S.C.S. 1445. The law provides that if a seller of real property is a "foreign person," the buyer must withhold a tax equal to 10% of the gross purchase price, unless an exemption applies under the law.

A "foreign person" is a non-resident alien individual, a foreign corporation not treated as a domestic corporation, or a foreign partnership, trust or estate. A resident alien is not considered a foreign person under the law.

Exemptions to FIRPTA

There are a number of exemptions to FIRPTA. A transaction is exempt if:

  • the seller of real property furnishes a non-foreign affidavit stating under penalty of perjury that the seller is not a foreign person
  • the transaction involves the transfer of a property acquired for use as the buyer's residence and the amount realized is not greater than $300,000
  • the seller obtains a "qualifying statement" from the Internal Revenue Service stating that no withholding will be required
Obtaining Legal Counsel

In connection with any real estate sale involving a foreign investor the buyer and the seller should consider making a specific agreement with regard to FIRPTA compliance. The expertise of a real estate attorney may be helpful to avoid complications that may otherwise arise at the last minute and delay the closing.  As always, when dealing with the Internal Revenue Service, it is important to proceed with an abundance of caution, as "an ounce of prevention is worth a pound of cure."

Joseph J. Huggins is a well known trial lawyer in Las Vegas, Nevada. The lawyers of Huggins & Maxwell, Ltd. have tried and won many important cases. They have practiced in the areas of litigation, real estate, business, medical malpractice, personal injury and products liability, since 1982. Please see their website for more detailed information: http://www.HugginsLaw.com

Article Source: http://EzineArticles.com/expert/Joseph_J._Huggins,_Esq./27089


Article Source: http://EzineArticles.com/1910180

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