Hola ALTA!!
We were asked a very important and common question today,
The question is
2 Sellers-Husband and Wife - Husband is foreign, wife is not; Can we report all proceeds under wife and then not do FIRPTA?
This in short answer is a NO, however, not all transactions are identical, it really depends on facts and circumstances.
There is a section of the FIRPTA regulation that talks about this,
https://www.irs.gov/individuals/international-taxpayers/firpta-withholding
Q&A – Question #2
Yes, withholding under IRC 1445 is applicable in situations where a USRPI held in the corpus of a grantor trust is disposed of when a Foreign person is considered a grantor with respect to all or a part of the USRPI. Based on the grantor trust rules (IRC 671 through IRC 678), an individual is the grantor of the asset(s) he or she contributes to the corpus of a trust that he or she is determined to still have control over under the grantor trust rules.
For example, if a USRPI is purchased equally by a husband, who is a U.S. person, and wife, who is a Foreign person, in their names and then contributed to the corpus of a trust. After the contribution, the husband and wife are determined to still have control over the USRPI under the grantor trust rules. Then the husband and wife are considered grantors, each owning 50% of the USRPI. So, for the purposes of IRC 1445, when the USRPI is disposed of, withholding would be applicable to the foreign spouse's 50% of the sales proceeds.
Additionally, if a USPRI is purchased in the trust's name from monies contributed to the trust in equal amounts by both the husband and wife (one U.S. person and one foreign person) and both spouses are considered to be grantors of the monies contributed to the trust used to purchase the USRPI, then both spouses are grantors of the USPRI once it is purchased. In the case, for purposes of IRC 1445, when the USRPI is disposed of, withholding would be applicable to the foreign person's 50% of the sales proceeds.
If you ever come across a situation like this one, give us a call we will be glad to answer your questions and make FIRPTA easy for you! 😊
See you soon....!!!
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Mary Enzi CAA
Tax Solutions – FIRPTA Consulting
[email protected]+1 (281) 578-1040
Barker TX
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