Hello ALTA,
A little late today, we are taking care of all of you who have taken the time to call, email or message me here in the ALTA forum, thank you, I decided to post again on this matter since is a recurrent one.
FIRPTA applies when a foreign person disposes of real estate property located in the U.S. and by disposition IRS means (copied from IRS-FIRPTA)
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. Persons purchasing U.S. real property interests (transferees) from foreign persons, certain purchasers' agents, and settlement officers are required to withhold 15%
So when a foreign person "TRANSFER" title to a "Domestic LLC" FIRPTA applies, the same way that FIRPTA applies if the foreign owner "GIFTS" the property to his/her U.S. tax resident relative (to avoid FIRPTA withholding) etc. there are many "tricks" people come up with to avoid FIRPTA not knowing the tax compliance, tax consequences and cost of this not so "effective" ideas.
Just yesterday we had a mother / daughter duo, both foreign nationals, the mother was the owner of the property, "gifted" the property to the daughter with one of those "cheap and easy quick deed type of documents" and listed the value of the property in $10.00, daughter, still a foreign person, wants to sell for a little over $750,000.00
This is more a "Tax" case than a "Title" case maybe but it just creates a hole bunch of issues, from gift tax, FIRPTA withholding that did not happened, and the basis of the daughter now being $10.00, so now she has to pay capital gain tax on $750,000? Lord help us all.... We are working on the best solution for them, but every transaction is unique and a valuable lesson for everyone involved.
If you need a firm that specializes in federal tax matters and knows the "ins and outs" of FIRPTA give us a call, we will be glad to assist and make FIRPTA easy for you.
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Mary Enzi
Tax Solutions – FIRPTA Consulting
Barker TX
+1 (281) 578-1040
[email protected]------------------------------