Hello ALTA:
I want to share with you a couple of Q&A, many of you have called and asked questions about FIRPTA, these are just a few of your question and our answers, I figure more Title Agents are probably experienced the same issues, if you have any doubts, questions, need clarification on the FIRPTA rules, please give us a call, we are always happy to answer your questions.
v Q: Is it required to have the full Employer ID Number / Social Security Number on the FIRPTA affidavit?
v A: A tax ID number (TIN) is required on a "Certificate of Non-Foreign Status".
v Q: I would appreciate if you could provide the code section or guideline that requires the full EIN/SSN on the FIRPTA affidavit if it is necessary.
v A: The Treasury Regulation code section pertaining to the Certificate of Non-Foreign Status is 26 CFR 1.1445-2(b)(2).
A transferee of a U.S. real property interest is not required to withhold under section 1445(a) if, before or at the time of the transfer, the transferor furnishes to the transferee a certification that is signed under penalties of perjury and-
(1) States that the transferor is not a foreign person; and
(2) Sets forth the transferor's name, identifying number and home address (in the case of an individual) or office address (in the case of an entity).
v Q: Foreign mother and son are executing a POA from Korea, on which they are giving all of the net proceeds to U.S. Citizen. So, 100% of the proceeds will be allocated to U.S. citizen therefore, we don't need to file FIRPTA documents on this matter.
v
v A: The Transferors will have to be allocated the contract sale price based upon their capital contributions.
a. It sounds like the US Son was added to avoid FIRPTA which would trigger a $10,000 willfulness penalty if discovered.
b. If the foreign parents truly made a bonafide gift of all the interest in the property to the US Son, recorded contemporaneously and the deed recorded with the county clerk, that would work however it brings up the gift tax.
i. A foreign person is allowed an exclusion of $60,000 and everything above that is subject to the Gift Tax.
ii. Gift tax on each foreign giftor would be approximately $25,400 and unlike FIRPTA which is a deposit, the gift tax is a tax due upon transfer to the US Son from the Non-Resident Alien (NRA) foreign giftor. So, by attempting to avoid FIRPTA, the NRA parents will have unwittingly incurred 50,800 in gift tax.
2. The attorney's comment that the property is being sold at a loss and not subject to FIRPTA is clearly incorrect. FIRPTA has nothing to do with gain or loss, it is a deposit based upon contract sale price designed to ensure NRA seller does not skip out on their US tax obligations.
§ 1.1445-1 Withholding on dispositions of U.S. real property interests by foreign persons:
(b) Duty to withhold -
(3) U.S. real property interest owned jointly by foreign and non-foreign transferors. The amount subject to withholding under paragraph (b)(1) of this section with respect to the transfer of a U.S. real property interest owned by one or more foreign persons (as defined in § 1.897–1(k)) and one or more non-foreign persons shall be determined by allocating the amount realized from the transfer between (or among) such transferors based upon the capital contribution of each transferor with respect to the property and by aggregating the amounts allocated to any foreign person (or persons). For this purpose, a husband and wife will each be deemed to have contributed 50 percent of the aggregate capital contributed by such husband and wife. See § 1.1445–1(f)(3)(iv) with respect to the crediting of the amount withheld between or among joint foreign transferors.
26 CFR 1.1445-1(b)(3)
https://www.ecfr.gov/current/title-26/part-1/section-1.1445-1#p-1.1445-1(b)(3)
(iv) Joint foreign transferors. If two or more foreign persons jointly transfer a U.S. real property interest, each transferor shall be credited with such portion of the amount withheld as such transferors mutually agree. Such transferors must request that the transferee reflect the agreed-upon crediting of the amount withheld on the Forms 8288–A filed by the transferee. If the foreign transferors fail to request that the transferee reflect the agreed-upon crediting of the amount withheld by the 10th day after the date of transfer, the transferee must credit the amount withheld equally between (or among) the foreign transferors. In such case, the transferee is indemnified pursuant to section 1461 against any claim by a transferor objecting to the resulting division of credits. For rules regarding the amount realized allocated to joint foreign and non-foreign transferors, see § 1.1445–1(b)(2).
26 CFR 1.1445-1(f)(3)(iv)
https://www.ecfr.gov/current/title-26/part-1/section-1.1445-1#p-1.1445-1(f)(3)(iv)
Mary Enzi, CAA
_________________________________
P. O. Box 207
Barker TX, 77413
281 578-1040 Ofc
832-201-9121 Fax
www.taxss.com
What Is FIRPTA? https://youtu.be/yzX19A2XTIU
Que es FIRPTA? https://www.youtube.com/watch?v=kNcVjuJ2rSs
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Mary Enzi CAA
Tax Solutions – FIRPTA Consulting
[email protected]
+1 (281) 578-1040
Barker TX
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