The buyer receives a qualifying statement, issued by the Secretary of the Treasury, stating that the foreign seller arranged to pay the tax or is exempt from the tax imposed.real property holding corporation or, as of the date of the transfer, the interests in the domestic corporation are not U.S. The transfer is of an interest in a non-publicly traded domestic corporation where the corporation provides an affidavit stating that the corporation is not and has not been a U.S.taxpayer identification number, usually a social security number The seller furnishes an affidavit stating, under penalty of perjury, that the seller is not a foreign person and provides the seller's U.S.The requirement that a buyer withhold a portion of the sales proceeds applies to every real estate transaction unless it meets one of the following exceptions set forth in Section 1445(b): However, any real property transaction potentially exposes buyers and the attorneys for both parties to tax liability. for a three-year period.īecause most real property sales do not involve these foreign entities, the majority of transactions involving real property will not require the buyer to withhold funds. Resident aliens possess a green card issued by the Immigration and Nationalization Service (INS) or can prove a legal physical presence in the U.S. FIRPTA does not consider resident aliens to be foreign persons. This is the buyer's responsibility, not the closer's.įIRPTA applies to all foreign persons, foreign corporations, and foreign partnerships, selling or transferring property located within the United States. Please be aware that ATG does not determine the citizenship of sellers or withhold sellers' proceeds under FIRPTA when conducting closings. real property interest to withhold ten percent of the amount realized by a foreign seller. The Foreign Investment in Real Property Transfer Act (FIRPTA) requires any buyer of a U.S. In an effort to correct this problem, Congress amended 26 USC § 1445 in 1984, placing the duty on the buyer to collect the tax by withholding funds from the sale. When foreign sellers of real estate located in the United States owed taxes on gains from a sale, the IRS could not collect unless the seller filed a tax return. Unfortunately for the IRS, this axiom did not always hold true for foreign sellers of real property. In life, two things are inevitable, death and taxes. The Privacy Concerns section was added June 18, 2014. This article originally published in the September 2002 issue of the ATG Concept. Stori, Senior Managing Attorney, ATG Underwriting Department By John Gollwitzer, ATG Law Clerk Privacy Concerns addition by Tania M.S.