Tax Attorneys Assisting With FIRPTA
FIRPTA is a provision in the Internal Revenue Code that requires withholding of income tax on foreign persons disposing of United States real property interests. FIRPTA is an acronym for the Foreign Investment in Real Property Tax Act of 1980.
The IRS defines “disposing” or “disposition” to include sale or exchange, liquidation, redemption, gift, and transfer, among other possible meanings. A “United States real property interest” includes sales of interests in parcels of real property as well as sales of shares in certain U.S. corporations that are considered U.S. real property holding corporations. Those purchasing property interests from foreign individuals are required to withhold 10% of the “amount realized” – this amount is intended to ensure U.S. taxation of gains realized.
The buyer is necessarily the withholding agent, and it is up to that person to determine if the seller is a foreign person – if the person is a foreign person and the buyer neglects to withhold, the buyer may be held liable by the IRS for the tax.
U.S. real property interests apply to the United States and the Virgin Islands and can include interests in mines, wells, and other natural deposits, as well as personal property associated with the real property, such as farming equipment or other machinery.
The “amount realized” is the sum of the cash paid (or to be paid), the fair market value of other property transferred, and the amount of liability assumed by the buyer – to put it simply, the amount realized is generally the amount paid for the property.
A foreign corporation that distributes a U.S. real property interest must withhold tax equal to 35% of the gain it recognizes on the distribution to its shareholders. Domestic corporations must withhold a tax equal to 10% of the fair market value, with specific criteria to be met.
FIRPTA issues can be extremely complex and require a meticulous attention to detail to ensure that the provisions are being appropriately met. Taxpayers with questions and concerns regarding FIRPTA transactions are encouraged to contact the knowledgeable tax attorneys at Yesner and Boss, P.L. for a consultation. Serving Tampa, St. Petersburg, Sarasota, Clearwater, New Tampa, and areas throughout Florida, Yesner and Boss, P.L. are committed to obtaining the best possible results in complex tax issues for their clients.
