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  • 1.  FIRPTA - Q&A

    Posted 09-13-2023 15:12
    Edited by Mary Enzi 09-14-2023 15:10

    Hello ALTA:

    I want to post another couple of Q&A, we receive so many questions from some of you!!! let me know if sharing this is helpful.

    Sometimes, many of you have the same questions, so here we go. 😊

    Q:  I have a seller that is a foreign national. His limited term driver's license has expired.  I have a cash contract for a vacant lot in the amount of $92,000 and the buyer is a small builder.  So, he won't be living on the property.  A couple of questions.  Do I still need to collect from the seller since it is under $100K? 

    A:  Yes, even when the sales price in this transaction is below $300,000 the property is a VACANT LOT, therefore, the buyer will not use this property as his main residence because is raw land, so FIRPTA compliance is due.

    Q:  If the buyer waives the FIRPTA process knowing the seller is a foreign national, does someone have to pay or does no one have to pay?

    A:  By IRS rules, the buyer is deeming the "withholding Agent" in a FIRPTA transaction, is buyer's responsibility to collect 15% from the sales price from a foreign seller, otherwise the BUYER will be held responsible for the FIRPTA withholding plus penalties and interests.

    Q:  Do you know in NJ, if you have a foreign person selling property do they need to withhold the 15%?

    A:  YES, FIRPTA is a federal regulation, so every state has to comply with FIRPTA rules when a real estate transaction involves a foreign seller.

    Q:  If we have a single member LLC, owned by a foreign person and they have an EIN are they still considered a disregarded entityDoes the IRS even assign EINs to single member LLCs?  Can you elaborate a little? 

    A:  YES, a single-member domestic limited liability company, while a recognized legal entity, is considered a "Disregarded Entity" for tax purposes. So, if the seller is a single-member limited liability company, then you have to look to the identity of the sole member of the limited liability companyIf the sole member is a "Foreign Person," then FIRPTA withholding rules apply in the same manner as if the seller was a foreign individual.

    Regarding to the EIN, YES, the IRS assigns an EIN to the single member LLC, as well as other entities such as (but not limited to) Partnership, C-Corp or S-Corp, taxwise the activity/income derived from the single member LLC is included on the Sch C of your Individual Tax Return form 1040 or 1040NR.

    Please do not hesitate to reach out to us should you need further information regarding FIRPTA, we will be glad to answer any questions, and make FIRPTA easy for you!

    Mary Enzi CAA
    Tax Solutions – FIRPTA Consulting
    +1 (281) 578-1040
    Barker TX

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