Tax Information
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Renewed Importance For Foreign Sellers Obtaining Withholding Certificates On Real Estate Sales The Internal Revenue Service has special, stringent rules for sales of U.S. real estate if a foreign person was on the title to the property at the time of his or her death. Basically, clear title cannot be conveyed nor can the heirs receive the sales proceeds until certain statutory procedures are complied with. Click here for additional information. Click here for additional information.
IRS Treatment of Quitclaims By Foreign Corporations To Their Foreign Shareholders And Real Estate Option Contracts An IRS Release holds that quitclaims by foreign corporations to their foreign shareholders and subsequent sale by the foreign individual shareholder is taxable as a sale by the corporation at its current fair market value, even though the final sale is made by the foreign individual. The quitclaim is subject to the FIRPTA withholding to the corporation and is taxable to the corporation at the higher corporate rates. Click here for additional information.
Reporting Procedures For Closing Agents And Rental Agents When A Foreign Seller Or Foreign Landlord Does Not Furnish A Tax I.D. Number Lately, we have received numerous requests from closing agents and rental agents on how to report real estate sales and rentals to the IRS on Forms 1099-S and 1042-S when the foreign property owner does not have or will not provide a U.S. tax identification number to the agent. Click here for additional information.
Guidelines For Foreign Sellers Applying For Relief From The 10% Withholding With the tourist season upon us we are seeing that numerous overseas investors are obtaining sales contracts on their Florida vacation property. With that in mind, we thought it would be a good idea to review some of the points you should be aware of when handling sales for foreign investors who do not want to wait well into 2009 to receive a refund for part or all of their 10% IRS “FIRPTA” withholding tax. Click here for additional information.
Condominium Associations Renting Units On Behalf Of Their Foreign Owners Are Subject To The Same Rules And Liabilities As Rental Agents The condominium associations that handle these rentals are subject to the same reporting and compliance rules as rental agents. These rules include collecting and payment of state and county sales taxes, filing information reports (Forms 1099, 1096, 1042 and 1042-S) annually with the Internal Revenue Service and complying with the special rules that apply to foreign owners who rent their Florida condominiums through their associations. Click here for additional information.
Sales Of U.S. Real Estate Involving A Foreign Decedent On Title At The Time Of Death The Internal Revenue Service has special, stringent rules for sales of U.S. real estate if a foreign person was on the title to the property at the time of his or her death. Basically, clear title cannot be conveyed nor can the heirs receive the sales proceeds until certain statutory procedures are complied with. Failure to adhere to these rules creates personal liability to anyone involved with the transaction who has receipt or control over the sale proceeds. Click here for additional information.
1031 Exchanges And Foreign Investors – Unique Considerations Each week we receive numerous questions from real estate professionals regarding the ability of foreign investors to transact Section 1031 exchanges. These types of transactions are also commonly referred to as “Starker”, tax deferred or tax free exchanges of real estate. Click here for additional information.
Tax Aspects Of Selling U.S. Real Estate By Non-U.S. Persons When a non-U.S. person sells U.S. real estate, the U.S. tax authorities (“IRS”) require that 10% of the gross sales price be withheld at closing and remitted as an estimated tax payment on behalf of the foreign seller. The 10% is merely a deposit against the seller’s actual tax liability as shown on their income tax return for the year of sale. Failure to comply with this requirement can subject certain parties associated with the transaction to assessment by the IRS for the 10% tax plus penalties and interest. Click here for additional information.
IRS Sounds “Warning Shot” To Rental Agents With Foreign Landlord Clients In an unprecedented move by the IRS, they have announced for the first time ever that they have redirected their resources and will significantly increase their audits of Form 1042 filers. The IRS has trained more than 400 agents and is also adding international agents for technical assistance. Click here for additional information.
Tax Planning For Mortgage Interest Deductions On U.S. Real Estate Owned By Foreign Persons The weakening U.S. dollar has increased the demand for U.S. real estate by foreign nationals. Many of these investors are borrowing against the equity in their foreign residences to increase the size of their U.S. investments. Part of the reasoning process in borrowing overseas is that many countries have lending rates that are even lower than interest rates here. Also, with their home country currency being stronger, it takes less funds to borrow to acquire their investment in the U.S. Click here for additional information.
Social Security Numbers, Tax ID Numbers And The 10% FIRPTA Withholding Each week we receive several phone calls asking if the 10% FIRPTA withholding is applicable if the seller holds a social security number or ITIN. We have addressed this topic before and need to keep re-emphasizing it to our readers since many of you do not deal with foreign related transactions on a regular basis. Click here for additional information.
Renewed Importance For Foreign Sellers Obtaining Withholding Certificates On Real Estate Sales When a non-U.S. person sells U.S. real estate, the U.S. tax authorities (“IRS”) require that 10% of the gross sales price be withheld at closing and paid as an estimated capital gains tax payment on behalf of the foreign seller. If the actual tax liability is less the buyer can obtain a refund by following certain procedures. Click here for additional information.
Avoiding The 30% Withholding Tax On Foreign Landlords Rental Income U.S. tax law requires any person collecting rents on behalf of a foreign property owner to withhold and remit to the IRS 30% of the gross rents they receive on behalf of that foreign property owner unless they have received certain documentation from the owner. Failure to adhere to these rules can subject the rental agent, or his or her company, to that 30% tax being assessed against them. Click here for additional information.
High Mortgage Balance Coupled With 10% FIRTPA Withholding Can Create Cash Shortfall For Foreign Sellers A potentially difficult situation for foreign sellers is coming to the forefront with U.S. real estate sales. This situation has been caused in part by the overzealous lending practices by certain financial institutions. What can happen is that a foreign seller could have to bring money to the closing table for a sale to be closed. Click here for additional information.
Common Misconceptions On The FIRPTA 10% Withholding For Foreign Sellers The 10% withholding applies! You have a foreign person disposing of U.S. real estate – period – no if’s, and’s or but’s. Congress is only trying to ensure that the foreign seller files a U.S. tax return and pays the same tax a U.S. person pays if he or she sells similar property. This is the #1 misconception by realtors, closing agents and foreign sellers! Click here for additional information.
The $300,000 Residency Exception To The FIRPTA 10% Withholding Rule There is a general income tax rule that any person (whether U.S. or foreign) who purchases U.S. real estate from a foreign person must withhold 10% of the gross purchase price and pay it to the IRS as an estimated income tax payment on behalf of the foreign seller. If the buyer fails to withhold the 10% and pay it to the IRS, the IRS can assess the 10% against the buyer. However, there are exceptions to this general rule. Click here for additional information.
IRS Problem Brewing With Reporting Of Foreign Landlord Rental Income By U.S. Rental Agents Several of our foreign clients are experiencing a developing problem with the IRS which can easily be avoided if their rental agents would report their rental income using the proper IRS forms. Click here for additional information.
How The $250,000-$500,000 Exclusion Of Gain On The Sale Of A Principle Residence Can Apply On The Sale Of U.S. Real Estate By A Nonresident Alien There is a U.S. tax rule that allows an individual to exclude from tax up to $250,000 of gain ($500,000 for a husband and wife meeting certain conditions) from the sale of a home owned and used by that individual as a “principal residence” for at least two of the five years immediately prior to the sale. “Principal residence” is a technical term created by the U.S. government of course. |
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