Publication 519 |
2000 Tax Year |
Tax Withheld on Real Property Sales
If you are a nonresident alien and you dispose of a U.S. real
property interest, the transferee (buyer) of the property generally
must withhold a tax equal to 10% of the amount realized on the
disposition. Withholding is also required on certain distributions and
other transactions by domestic or foreign corporations, partnerships,
trusts, and estates. These rules are covered in Publication 515
under
U.S. Real Property Interest.
If you are a partner in a domestic partnership, and the partnership
disposes of a U.S. real property interest at a gain, tax will be
withheld by the partnership on the amount of gain allocable to its
foreign partners. Your share of the income and tax withheld will be
reported to you on Form 8805, Foreign Partner's Information
Statement of Section 1446 Withholding Tax, or Form 1042-S,
Foreign Person's U.S. Source Income Subject to Withholding
(in the case of a publicly traded partnership).
Withholding is not required in the following situations.
- The property is acquired by the buyer for use as a residence
and the amount realized (sales price) is not more than
$300,000.
- The property disposed of is an interest in a domestic
corporation if any class of stock of the corporation is regularly
traded on an established securities market.
- The property disposed of is an interest in a corporation
that is not regularly traded on an established market if you give the
buyer a copy of a statement issued by the corporation certifying that
the interest is not a U.S. real property interest.
- You (the seller) give the buyer a certification stating,
under penalties of perjury, that you are not a foreign person, and
containing your name, U.S. taxpayer identification number, and home
address.
- The buyer receives a withholding certificate from the
Internal Revenue Service.
- You give the buyer written notice that you are not required
to recognize any gain or loss on the transfer because of a
nonrecognition provision in the Internal Revenue Code or a provision
in a U.S. tax treaty. The buyer must file a copy of the notice with
the Internal Revenue Service Center, P.O. Box 21086, DP 8731 FIRPTA
Unit, Philadelphia, PA 19114-0586. You must verify the notice as
true and sign it under penalties of perjury. The notice must contain
the following information.
- A statement that the notice is a notice of nonrecognition
under regulation section 1.1445-2(d)(2).
- Your name, taxpayer identification number, and home
address.
- A statement that you are not required to recognize any gain
or loss on the transfer.
- A brief description of the transfer.
- A brief summary of the law and facts supporting your claim
that recognition of gain or loss is not required.
- The amount you realize on the transfer of a U.S. real
property interest is zero.
- The property is acquired by the United States, a U.S. state
or possession, a political subdivision, or the District of
Columbia.
The certifications in (3) and (4) must be disregarded by the buyer
if the buyer has actual knowledge, or receives notice from a seller's
or buyer's agent, that they are false.
Withholding certificates.
The tax required to be withheld on a disposition can be reduced or
eliminated under a withholding certificate issued by the IRS. Either
you or the buyer can request a withholding certificate.
A withholding certificate can be issued due to any of the
following.
- The IRS determines that reduced withholding is appropriate
because either:
- The amount required to be withheld would be more than your
maximum tax liability, or
- Withholding of the reduced amount would not jeopardize
collection of the tax.
- All of your realized gain is exempt from U.S. tax.
- You or the buyer enter into an agreement for the payment of
tax providing security for the tax liability.
Get Publication 515
and Form 8288-B for information on
procedures to request a withholding certificate.
Credit for tax withheld.
The buyer must report and pay over the withheld tax within 20 days
after the transfer using Form 8288, U.S. Withholding Tax Return
for Dispositions by Foreign Persons of U.S. Real Property Interests.
This form is filed with the IRS with two copies of Form
8288-A, Statement of Withholding on Dispositions by Foreign
Persons of U.S. Real Property Interests. Copy B of this
statement will be stamped received by the IRS and returned to you (the
seller). You must file Copy B with your tax return to take credit for
the tax withheld.
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