Important
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For information call now:
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Additional information
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Internal Revenue Service
Austin Service Center
ITIN Operation
P.O. Box 149342
Austin, TX 78714-9342
IN
1-800-829-1040
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Tax Withheld on Real Property Sales
If you are a nonresident alien and you dispose of a U.S. real property interest,
the transferee (buyer) of the property generally must withhold a tax equal to
10% of the amount realized on the disposition.
A distribution by a qualified investment entity to a nonresident alien
shareholder that is treated as gain from the sale or exchange of a U.S. real
property interest by the shareholder is subject to withholding at 35%.
Withholding is also required on certain distributions and other transactions by
domestic or foreign corporations, partnerships, trusts, and estates.
If you are a partner in a domestic partnership, and the partnership disposes of
a U.S. real property interest at a gain, the partnership will withhold tax on
the amount of gain allocable to its foreign partners. Your share of the income
and tax withheld will be reported to you on Form 8805, Foreign Partner�s
Information Statement of Section 1446 Withholding Tax, or Form 1042-S, Foreign
Person�s U.S. Source Income Subject to Withholding (in the case of a publicly
traded partnership).
Withholding is not required in the following situations.
1. The property is acquired by the buyer for use as a residence
and the amount realized (sales price) is not more than $300,000.
2. The property disposed of is an interest in a domestic
corporation if any class of stock of the corporation is regularly traded on an
established securities market. However, this exception does not apply to certain
dispositions of substantial amounts of non-publicly traded interests in publicly
traded corporations.
3. The property disposed of is an interest in a U.S.
corporation that is not regularly traded on an established market and you (the
seller) give the buyer a copy of a statement issued by the corporation
certifying that the interest is not a U.S. real property interest.
4. You (the seller) give the buyer a certification stating,
under penalties of perjury, that you are not a foreign person, and containing
your name, U.S. taxpayer identification number, and home address. You can give
the certification to a qualified substitute. The qualified substitute gives the
buyer a statement, under penalties of perjury, that the certification is in the
possession of the qualified substitute. For this purpose, a qualified substitute
is
(a) the person (including any attorney or title company)
responsible for closing the transaction, other than your agent, and
(b) the buyer�s agent.
5. The buyer receives a withholding certificate from the
Internal Revenue Service.
6. You give the buyer written notice that you are not required
to recognize any gain or loss on the transfer because of a nonrecognition
provision in the Internal Revenue Code or a provision in a U.S. tax treaty. The
buyer must file a copy of the notice with the Ogden Service Center, P.O. Box
409101, Ogden, UT 84409. You must verify the notice as true and sign it under
penalties of perjury. The notice must contain the following information:
a. A statement that the notice is a notice of nonrecognition
under regulation section 1.1445-2(d)(2).
b. Your name, taxpayer identification number, and home address.
c. A statement that you are not required to recognize any gain
or loss on the transfer.
d. A brief description of the transfer.
e. A brief summary of the law and facts supporting your claim
that recognition of gain or loss is not required.
You may not give the buyer a written notice for any of the following transfers:
the sale of your main home on which you exclude gain, a like-kind exchange that
does not qualify for nonrecognition treatment in its entirety, or a deferred
like-kind exchange that has not been completed at the time the buyer must file
Form 8288. Instead, a withholding certificate (described next) must be obtained.
7. The amount you realize on the transfer of a U.S. real
property interest is zero.
8. The property is acquired by the United States, a U.S. state
or possession, a political subdivision, or the District of Columbia.
9. A distribution from a domestically controlled qualified
investment entity that is treated as a distribution of a U.S. real property
interest only because an interest in the entity was disposed of in an applicable
wash sale transaction.
The certifications in (3) and (4) must be disregarded by the buyer if the buyer
or qualified substitute has actual knowledge, or receives notice from a seller�s
or buyer�s agent (or substitute), that they are false. This also applies to the
qualified substitute�s statement under (4).
The tax required to be withheld on a disposition can be reduced or eliminated
under a withholding certificate issued by the IRS. Either you or the buyer can
request a withholding certificate. A withholding certificate can be issued due
to any of the following.
1. The IRS determines that reduced withholding is appropriate
because either:
a. The amount required to be withheld would be more than your
maximum tax liability, or
b. Withholding of the reduced amount would not jeopardize
collection of the tax.
2. All of your realized gain is exempt from U.S. tax.
3. You or the buyer enters into an agreement for the payment of
tax providing security for the tax liability.
The buyer must report and pay over the withheld tax within 20 days after the
transfer using Form 8288, U.S. Withholding Tax Return for Dispositions by
Foreign Persons of U.S. Real Property Interests. This form is filed with the IRS
with copies A and B of Form 8288-A, Statement of Withholding on Dispositions by
Foreign Persons of U.S. Real Property Interests. Copy B of this statement will
be stamped received by the IRS and returned to you (the seller) if the statement
is complete and includes your taxpayer identification number (TIN). You must
file Copy B with your tax return to take credit for the tax withheld. A stamped
copy of Form 8288-A will not be provided to you if your TIN is not included on
that form. In this case, to get credit for the tax withheld, you must attach to
your U.S. income tax return substantial evidence of withholding (for example,
closing documents) and a statement that contains all of the following
information:
� Your name and TIN.
� The buyer�s name, address, and TIN.
� A description and location of the property.
� The date of the transfer.
� The amount realized on the transfer.
� The amount of tax withheld.
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