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WHAT FIRPTA
IS
F.I.R.P.T.A. is an acronym A. It is the Transferee’s/Buyer’s
for Foreign Investment Real responsibility to determine
Property Tax Act. It was if the Transferor/Seller is a
established in 1980 for the foreign person and subject to
purpose of withholding the withholding.
estimated amount of taxes
which may be due on the gain Q. Are there exceptions from
of the disposition of a U.S. Real F.I.R.P.T.A. withholding?
Property Interest from foreign A. Yes. Exceptions are explained
persons. A U.S. real property on the IRS.GOV website.
interest includes sales of interests Q. Who is responsible for
in parcels of real property as withholding the required
well as sales of shares in certain percentage of the amount
U.S. corporations which are realized?
considered U.S. real property A. Withholding is the
holding corporations. Persons responsibility of the Transferee/
purchasing U.S. real property Buyer.
interests (transferee) from
foreign persons are required to Q. How and where is the
withhold a percentage of the F.I.R.P.T.A. withholding paid?
amount realized. A. The Buyer must complete
Q. What is the purpose of the IRS Form 8288 and Form 8288-
A and remit them, along with
withholding? the payment, to the IRS at the
A. Real estate withholding is address shown on Form 8288.
a prepayment of anticipated
tax due on the gain of the sale Q. What is the Escrow Officer’s
of a U.S. real property interest. role with regards to F.I.R.P.T.A.?
It is not an additional tax. Any A. The IRS Rule requires the
difference between the amount Transferee/Buyer to determine
paid and the amount owed is if withholding applies and, if so,
refunded to the Seller when a tax to remit the withholding to the
return is filed. For the current IRS. If the Buyer has determined
withholding percentage please F.I.R.P.T.A. withholding applies,
visit the IRS.GOV website. the Buyer and Seller may mutually
Q. Who is responsible for instruct the Escrow Officer to
finding out if the transferor is a deduct the percentage, gather
foreign person? Sedona, Arizona the applicable forms, and remit
Photo by: Ted Miller (Wickenburg) them to the IRS on their behalf.
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