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.

1. The property is acquired by the buyer for use as a residence and the amount realized (sales price) is not more than $300,000.
2. 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.
3. 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.
4. 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.
5. The buyer receives a withholding certificate from the Internal Revenue Service.
6. 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.
   1. A statement that the notice is a notice of nonrecognition under regulation section 1.1445-2(d)(2).
   2. Your name, taxpayer identification number, and home address.
   3. A statement that you are not required to recognize any gain or loss on the transfer.
   4. A brief description of the transfer.
   5. A brief summary of the law and facts supporting your claim that recognition of gain or loss is not required.
7. The amount you realize on the transfer of a U.S. real property interest is zero.
8. 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.

1. The IRS determines that reduced withholding is appropriate because either:
   1. The amount required to be withheld would be more than your maximum tax liability, or
   2. Withholding of the reduced amount would not jeopardize collection of the tax.
2. All of your realized gain is exempt from U.S. tax.
3. 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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