Hello ALTA:
Is only Tuesday and we have received so many phone calls asking when FIRPTA applies, simply stated The IRS treats every real estate transaction as a FIRPTA transaction until Buyer receives from Seller a "certificate of non-foreign status". Title Company Settlement Agents: It is a recommended practice to EITHER collect a certificate of non-foreign status from each Seller in every real estate transaction OR inform Buyer that the sale may be subject to FIRPTA withholding.
Who can be exempt from FIRPTA using a certificate of non-foreign status?
Certificate of non-foreign status (any of the following qualify):
i. U.S. Passport
ii. U.S. Birth certificate
iii. U.S. Certificate of Naturalization
iv. U.S. Permanent Resident Visa aka "Green Card"
v. Meet SPT (Substantial Presence Test)
SPT is complex taking many factors into account, we recommend Buyer & Seller engage the services of an experienced competent qualified licensed professional to verify the seller's SPT.
There is no requirement for Buyer, Agent for Buyer (Realtor), Settlement Agent, Title Company, or Escrow Officer to audit, or otherwise examine Seller's certificate of non-foreign status. However, if there are conflicting facts, or the certificate appears on its face to be false, Buyer should be notified and Buyer should not accept the certificate.
If Seller cannot provide the certificate of non-foreign status i.e. Seller is foreign, then proceed with FIRPTA withholding:
FIRPTA withholding compliance.
Generally, 15% of the of the contract sale price must be held back from Seller proceeds, and this becomes a line item on the closing disclosure settlement statement as a payment to the US Treasury, FIRPTA withholding can be reduced to 10% if buyer will use the property as their primary residence if the sales price if the property is up to $1 million dollars.
Please do not hesitate to give us a call if you have questions, we will be glad to assist and make FIRPTA 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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