When a foreign national has an ownership or interest in U.S. real property and realizes a gain from the sale of that property, the Foreign Investment in Real Property Tax Act of 1980 (FIRPTA) comes into play. FIRPTA governs sales of U.S. real property interests when the seller is a foreign national. This law requires withholding as part of the sale.

Like much of the U.S. federal tax code, what seems easy on the surface is often a complicated process full of exceptions and requirements. Failure to properly file can result in taxpayers missing out on reductions of their tax burden.

How an Experienced Tax Attorney Can Help

FIRPTA is no exception to this rule. The IRS website alone lists ten exceptions to its standard withholding requirements. Bringing in an experienced tax attorney can make the process easier to navigate and also reduce the likelihood of missing deductions, exceptions, and other quirks in the tax code that can result in taxpayers owing less money.

For example, a foreign national owns a U.S. real property interest in Arizona. The State of Arizona purchases the property as part of an expansion of the state's community college program. This sale falls under one of FIRPTA's exceptions of not requiring withholding.

In addition, the ownership of the property can be relevant in cases of multiple owners. If one owner has U.S. citizenship or a green card while the other is a foreign national, that changes how much is withheld under FIRPTA.

Other issues can include applying for an Individual Taxpayer Identification Number (ITIN) or residency requirements for transfers of property between family members. While publicly-traded stocks generally fall under FIRPTA, some non-publicly traded interests in publicly traded corporations may be excluded from the withholding requirements.

Taxpayers benefit from tailored advice on how to navigate tax issues. While general guides can be a good starting point, an experienced tax attorney can help make the process easier to comprehend and identify lesser-known areas of the law and how they might apply to a foreign taxpayer's tax burden.

If you have questions about FIRPTA or other tax issues for foreign nationals, call Senior Partner, Tax Controversy Attorney, and former IRS attorney Brandon A. Keim at (602) 200-7399 or contact him online to discuss your options.