Page 20 - Jon Baer Sellers Guide

FIRPTA

Foreign Investment in Real Property Tax Act

Per IRS guidelines, Foreign Sellers are subject to a withholding tax of 15% of the Gross
Sales Price. However, FIRPTA does provide certain exemptions from payment of the tax.
Below is a list of the most common exemptions:
• The Seller is not a foreign person. – The Seller is a US Citizen or a US Resident Alien. A Non-
Foreign Status Affidavit must be completed and executed by the Seller.
• Residence purchased for $300,000 or less – The property is being acquired for use as the Buyer’s
residence (as defined by the IRS*) and the sales price is $300,000 or less. This exemption only
applies if the Buyer is an individual.

• Withholding Certificate – The Seller received a Withholding Certificate from the IRS waiving or
reducing the withholding.

Important Notice: A Social Security Number (SSN) or Taxpayer Identification Number (TIN) is required
on ALL transactions. A Foreign Seller can apply for a SSN/TIN by completing IRS Form W-7 and
providing all supporting documentation to the IRS. This form as well as additional FIRPTA forms and
information are available on the IRS website at www.irs.gov.

* Residence means that the Buyer or a member of his/her family “has definite plans to reside in the property for at least 50%
of the number of days the property is used by any person during each of the first two 12-month periods following the date of
transfer.”
** It is advised that the Seller contact their attorney or accountant regarding the withholding requirements and possible exemptions.

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