Hello!!
I am working tirelessly to have all tax returns completed next week so I can be ready for ALTA ONE in a few days!! OMG really... time flies!!
We were ask a question that is a very common one, the question is;
"I have a Canadian client who wants to transfer her wholly owned property into her Canadian trust. Will this trigger FIRPTA? Will she need to pay taxes based upon the now fair market value of the property?"
So basically, this person is just moving the property from her personal name to her Trust "from her right pocket to the left pocket" the property will remain, in a way, in her possession, however.... The IRS is very clear on the concept of "DISPOSITION" , and quote
"A disposition means "disposition" for any purpose of the Internal Revenue Code. This includes but is not limited to a sale or exchange, liquidation, redemption, gift, transfers, etc."
FIRPTA Withholding
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| 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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So the short answer is YES, FIRPTA applies, and NO, please do not lower the value of the property on paper to reduce or eliminate the withholding because that will be your basis when you sale the property and then you will have to pay taxes on higher capital gains. What you do is you contact an expert in FIRPTA and taxes, remember is better to do things right at the front end than fixing easily preventable mistakes at the back end.
Give us a call, we know taxes you know title, we are will make a great team!! we will make FIRPTA and taxes easy for you 😊
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Mary Enzi CAA
Tax Solutions – FIRPTA Consulting
[email protected]
+1 (281) 578-1040
Barker TX
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