Foreign Investment in Real Property Tax Act

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Foreign Investment in Real Property Tax Act (FIRPTA)

A federal law designed to assist in the collection of income taxes when foreign owners and investors sell real property or shares in entities that own real property.

Purchasers are required to withhold 10 percent of the sales price unless either of the following occurs:

1. The IRS is asked to calculate the exact taxes that would be due, in which case that amount will be withheld.

2. The purchaser will use the property as a residence and the selling price is less than $300,000.

Purchasers must report the withholding on IRS Form 8288 or 8288-A and must report and pay over the money within 20 days after purchase. If purchasers do not withhold, they may be liable for the taxes themselves.Almost all real estate closings today require the seller's signature on what's called the FIRPTA affidavit, stating that the seller is not a foreign person. (For more information, see Publication 515,“Withholding of Tax on Nonresident Aliens and Foreign Entities,”available at the IRS Web site,www.irs.gov.)

References in periodicals archive ?
In summary, although foreign investors should have very strong incentives to avoid FIRPTA tax on their U.
The CBRE report also notes that the potential FIRPTA changes could also increase clarity and transparency for investors by replacing the varying sets of tax regulations, exemptions and withholding requirements currently in place for foreign and domestic investors with a single, clearly defined tax scheme.
The rules for dispositions of interests in entities holding USRP were included in FIRPTA because, otherwise, a foreign investor could avoid tax on the gain by holding the real estate through a corporation, partnership, or trust and disposing of the interest in that entity rather than having the entity itself sell the real estate.
Thev would also double--to 10 percent--the amount of stock a foreign entity could control in a publicly traded REIT without triggering FIRPTA.
In the view of The Roundtable and its coalition partners, any long-term HTF funding bill should include FIRPTA reforms such as those in H.
This underlying intent often is lost in practice--the lack of regulatory and published guidance about the treatment of partnerships has left taxpayers and tax practitioners uncertain about how to identify a reasonable method to determine the amount of gain subject to tax under FIRPTA.
Regulated investment company treatment under FIRPTA (Sec.
Before the issuance of the ruling, there was no guidance on how the NPC rules work in conjunction with the FIRPTA provisions.
Under FIRPTA, foreign investors selling real estate in the U.
For FIRPTA purposes, "disposition" is defined broadly as "any transfer that would constitute a disposition by the transferor for any purpose of the .
One possible strategy to avoid FIRPTA involves the use of a shared appreciation mortgage (SAM).