Non-Foreign Affidavit Under IRC 1445
Description: Under Federal law, (the Foreign
Investment in Real Property Tax Act (FIRPTA)(26 USC 1445) and the regulations
thereunder (26 CFR Parts 1 and 602)), a buyer of real estate is required
to withhold a tax from the sale of real property to a foreign person unless
an exemption applies. An exemption from withholding is provided for
individuals who purchase property for use as their principal residence
for $300,000 or less. Principal residence is defined to mean that the buyer
will reside there for more than 50% of the time in each of the next two
years. If you have a duty to withhold and you fail to do so, you
can be liable for an amount equal to your compensation in the transaction
and in some cases for the amount of tax that should have been withheld
The affidavit is needed to provide the buyer with assurance that the seller
is not a foreign person.
The general rule and exemptions as stated in Sec. 1445, Withholding
of tax on dispositions of United States real property interests, provides:
(a) General rule
Except as otherwise provided in this section, in the case of any
disposition of a United States real property interest (as defined in section
897(c)) by a foreign person, the transferee shall be required to deduct
and withhold a tax equal to 10 percent of the amount realized on the disposition.
(b) Exemptions
No person shall be required to deduct and withhold any amount under
subsection (a) with respect to a disposition if paragraph (2), (3), (4),
(5), or (6) applies to the transaction.
(2) Transferor furnishes nonforeign affidavit. Except as provided in paragraph (7), this paragraph applies to
the disposition if the transferor furnishes to the transferee an affidavit
by the transferor stating, under penalty of perjury, the transferor's United
States taxpayer identification number and that the transferor is not a foreign person.
(3) Nonpublicly traded domestic corporation furnishes affidavit that
interests in corporation not United States real property interests.
Except as provided in paragraph (7), this paragraph applies in the case
of a disposition of any interest in any domestic corporation if the domestic
corporation furnishes to the transferee an affidavit by the domestic corporation
stating, under penalty of perjury, that -
(A) In general. This paragraph applies to the disposition if the transferee
receives a qualifying statement at such time, in such manner, and subject
to such terms and conditions as the Secretary may by regulations prescribe.
(5) Residence where amount realized does not exceed $300,000. This paragraph applies to the disposition if -
(6) Stock regularly traded on established securities market. This paragraph
applies if the disposition is of a share of a class of stock that is regularly
traded on an established securities market.
(7) Special rules for paragraphs (2) and (3). Paragraph (2) or (3) (as the case may be) shall not apply to any
disposition -
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