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What Is FIRPTA And

            Who Does It Apply To?



















            FIRPTA is the acronym for the Foreign Investment in Real Property Tax Act which was created in 1980. This
            allows for the United States to tax foreign sellers on dispositions of U.S. real property interests. A disposition
            means “disposition” for any purpose of the Internal Revenue Code. This includes but is not limited to a sale
            or exchange, liquidation, redemption, gifts and/or transfers. A U.S. 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. Persons purchasing U.S. real property interests from foreign persons,
            certain purchasers’ agents, and settlement officers are required to withhold 10 percent of the amount real-
            ized. Withholding is intended to ensure U.S. taxation of gains realized on disposition of such interests. The
            transferee/buyer is the withholding agent.

            The transferee must deduct and withhold a tax equal to 10% (or other amount) of the total amount realized
            by the foreign person on the disposition. The amount realized is the sum of (1) The cash paid, or to be paid
            (principal only), (2) the fair market value of other property transferred, or to be transferred, and (3) the
            amount of any liability assumed by the transferee or to which the property is subject immediately before and
            after the transfer. The amount realized is generally the amount paid for the property. If the property trans-
            ferred was owned jointly by U.S. and foreign persons, the amount realized is allocated between the transfer-
            ors based on the capital contribution of each transferor. These rules are general, however some exceptions
            may apply to different scenarios.

            Below are Web links that will take you directly to the following FIRPTA Forms:


            Form 8288
            U.S. Withholding Tax Return for Dispositions by Foreign Persons of U.S. Real Property Interests
            http://www.irs.gov/pub/irs-pdf/f8288.pdf
            Form 8288-A
            Statement of Withholding on Dispositions by Foreign Persons of U.S. Real Property Interests
            http://www.irs.gov/pub/irs-pdf/f8288a.pdf
            Form 8288-B
            Application for Withholding Certificate for Dispositions by Foreign Persons of U.S. Real Property Interests
            http://www.irs.gov/pub/irs-pdf/f8288b/pdf
            Form W- 8BEN
            Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding
            http://www.irs.gov/pub/irs-pdf/fw8ben.pdf
            Form W- 7
            Application for IRS Individual Taxpayer Identification Number
            http://www.irs.gov/pub/irs-pdf/fw7.pdf



       www.driggtitle.com                                                                                          24
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