Kim:
Thank you for your message, in this particular scenario I was referring to a "single member LLC" or "sole proprietor", in this case YES, the Domestic LLC although a legal entity, is considered "disregarded" for the IRS and we look at the status of the sole owner of the domestic LLC, if the owner is a foreign individual, then the buyer should proceed with FIRPTA compliance and withhold 15% of the sales price of the property from the seller.
Taxwise, a sole proprietor, includes the activity, income and/or loss of the LLC on the Sch C of his/her U.S. tax return form 1040 or 1040NR, which is an individual tax return.
If the domestic LLC is a partnership the rules are a bit different, since the Partnership files its own return, the same with a C-Corp or any other former corporation.
Is this helpful? let me know if you have more questions, or feel free to give our office a call, I am currently out of the country, but Zahira Diaz is our FIRPTA department manager and she will be able to clarify information and answer additional questions you may have.
Thank you!
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Mary Enzi CAA
Tax Solutions – FIRPTA Consulting
mary.santiago@taxss.com+1 (281) 578-1040
Barker TX
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Original Message:
Sent: 09-15-2023 13:12
From: Kim Bontrager
Subject: FIRPTA - Multiple sellers 1 foreign
Under The Seller is a "Domestic LLC"
FIRPTA rules apply to the foreign owner "OF" the Limited Liability Company.
Best Regards,
Kim f. bontrager
LICENSED Title Agent/PARALEGAL
Kauffman THOMPSON, PLLC
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(941) 479-3006
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kim@kauffmanthompson.com
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Original Message:
Sent: 9/14/2023 10:02:00 AM
From: Mary Enzi
Subject: FIRPTA - Multiple sellers 1 foreign
Good morning ALTA!
I hope you are getting ready for the weekend, we were asked another GREAT question, and I want to share it with you...so here we go.
Q: If the sale price of a residence is $375,000.00 and there are four (4) sellers and only one is foreign, can the buyer accept a FIRPTA Affidavit because the value of the foreign person's 1/4 interest is below $300,000.00?
A: When there is more than one seller, the sales price is divided equally. So even though the foreign seller's allocation is less than $300K...IRS still looks at the overall sales price of the $375,000.
Sale Price: $375,000
Allocation:
- Seller 1 (Foreign): $93,750
- Seller 2 (U.S): $93,750
- Seller 3 (U.S): $93,750
- Seller 4 (U.S): $93,750
FIRPTA: 15% of the 93,750 =$14,062.50
- If buyer is going to live in the property AND agrees to sign affidavit this can be reduced to 10%.
- 10% of the $93,750= $9,375 FIRPTA Withholding
Please refer below to Q&A from IRS where it is explained further.
FIRPTA Withholding
| Irs | remove preview |
| | FIRPTA Withholding | | Withholding of Tax on Dispositions of United States Real Property Interests The disposition of a U.S. real property interest by a foreign person (the transferor) is subject to the Foreign Investment in Real Property Tax Act of 1980 (FIRPTA) income tax withholding. FIRPTA authorized the United States to tax foreign persons on dispositions of U.S. | |
|
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Please keep sending your questions we are glad to be able to answer all of them, we love making FIRPTA easy for you!
Send me an email if you have further questions on this particular matter or you have any other FIRPTA question.
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Mary Enzi CAA
Tax Solutions – FIRPTA Consulting
mary.santiago@taxss.com
+1 (281) 578-1040
Barker TX
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